
                          BOARD MEETING

                        STATE OF CALIFORNIA

                        AIR RESOURCES BOARD









                        AIR RESOURCES BOARD

                            AUDITORIUM

                        9530 TELSTAR AVENUE

                       EL MONTE, CALIFORNIA









                    THURSDAY, DECEMBER 6, 2007

                             9:00 A.M.











    TIFFANY C. KRAFT, CSR, RPR
    CERTIFIED SHORTHAND REPORTER
    LICENSE NUMBER 12277


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             ii

                            APPEARANCES



    BOARD MEMBERS

    Ms. Mary D. Nichols, Chairperson

    Ms. Sandra Berg

    Ms. Judith G. Case

    Ms. Dorene D'Adamo

    Ms. Lydia Kennard

    Mr. Jerry Hill

    Mr. Ronald O. Loveridge

    Mrs. Barbara Riordan

    Mr. Ron Roberts

    Dr. Daniel Sperling



    STAFF

    Mr. Tom Cackette, Chief Deputy Executive Officer

    Mr. James Goldstene, Executive Officer

    Mr. Tom Jennings, Chief Counsel

    Ms. Diane Johnston, Senior Attorney

    Mr. Michael Scheible, Deputy Executive Officer

    Ms. Lynn Terry, Deputy Executive Officer

    Ms. Kathleen Quetin, Ombudsman

    Ms. Lori Andreoni, Board Secretary

    Ms. Analisa Bevan, Manager, Mobile Source Control Division

    Mr. Dipak Bishnu, Air Resources Engineer, On-Road Heavy
    Duty Diesel Section, Mobile Source Control Division


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             iii

    Mr. Richard Bode, Chief, Emissions Inventory Branch, PTSD
                       APPEARANCES CONTINUED


    STAFF

    Mr. Bob Cross, Division Chief, Mobile Source Control
    Division

    Dr. Lori Miyasato, Health and Ecosystems Assessment
    Section, Research Division

    Ms. Annmarie Mora, Manager, Research Planning & Climate
    Change Outreach Section, Research Division

    Dr. Linda Murchison, Chief, PTSD

    Ms. Jamesine Rogers, Planning and Technical Support
    Division

    Mr. Doug Thompson, Manager, Climate Change Reporting
    Section, PTSD

    Mr. Michael Waugh, Manager, Program Assistance Section,
    SSD


    ALSO PRESENT

    Mr. Don Anair, Union of Concerned Scientists

    Ms. Diane Bailey, NRDC

    Mr. John Busterud, PG&E Co.

    Mr. Tim Carmichael, Coalition for Clean Air

    Mr. Darrell Clarke, Sierra Club

    Mr. Matt Davis, Port of Oakland

    Mr. Sean Edgar, CA Refuse Removal Council

    Mr. Daniel Emmett, Energy Independence Now

    Mr. Tony Fischer, Nummi

    Mr. Jim Flanagan, Maersk Inc.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             iv

                       APPEARANCES CONTINUED



    ALSO PRESENT

    Ms. Sarah Flanagan, AIAM

    Mr. Jerry Frost, Kern Oil Refining Co.

    Ms. Danielle Fugere, Friends of the Earth

    Mr. T.L. Garrett, PMSA

    Mr. Bob Hoffman, Dock Watts, LLC

    Mr. Henry Hogo, SCAQMD

    Ms. Bonnie Holmes-Gen, American Lung Association

    Mr. Thomas Jeleic, Port of Long Beach

    Mr. Scott Johns, Clean Air Marine Power

    Mr. Tom Jordan, SJVAPCD

    Mr. John Kaltenstein, Friends of the Earth

    Mr. Gregory Klatt, AREM

    Mr. Greg Knapp, TXI/PCA

    Mr. Rhey Lee, Mayor Bonnie Lowenthal, City of Long Beach

    Mr. Eric Little, Southern California Edison

    Mr. Joseph Lyons, AB 32 Implementation Board & CA
    Manufacturers & Tech Association

    Mr. Derek Markolf, California Climate Action Registry

    Ms. Julie May, Communities for a Better Environment

    Mr. Bruce McLaughlin, California Municipal Utilities
    Association

    Ms. Ann McQueen, Mitsubishi Cement & National Cement


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             v

                       APPEARANCES CONTINUED



    ALSO PRESENT

    Mr. Taylor Miller, Sempra Energy

    Ms. Wendy Mitchel, PG&E

    Ms. Linda Nicholes, Plug In America

    Mr. Mark Nordheim, Chevron

    Mr. Kevin Norton, International Brotherhood of Electrical
    Workers

    Mr. Tim O'Connor, Environmental Defense

    Ms. Rupal Patel, Communities for Clean Ports

    Mr. Norman Pedersen, Southern California Public Power
    Authority

    Mr. Doug Quetin, CAPCOA

    Ms. Cathy Reheis-Boyd, WSPA

    Mr. Mark Rose, BAAQMD

    Ms. Nicole Shahenian, Breathe California

    Mr. Jesus Torres, Communities for a Better Environment

    Mr. Seiichi Tsurumi, Sound Energy Solutions

    Mr. Barry Wallerstein, SCAQMD

    Ms. Devra Wang, NRDC

    Mr. Chuck White, Waste Management

    Ms. Joy Williams

    Mr. Eric Witten, Clean Air Logix

    Ms. Jill Whynot, SCAQMD


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             vi

                               INDEX
                                                          PAGE

    Pledge of Allegiance                                    1

    Item 7-12-1
         Chairperson Nichols                                3
         Executive Officer Goldstene                        3
         Staff Presentation                                 3


    Item 7-12-8
         Chairperson Nichols                                8
         Executive Officer Goldstene                        8
         Motion                                            10
         Vote                                              10

    Item 7-12-2
         Chairperson Nichols                               11
         Executive Officer Goldstene                       11
         Staff Presentation                                13
         Q&A                                               29

    Public Comment
         Mr. Lewis                                         38


    Item 7-12-3
         Chairperson Nichols                               42
         Executive Officer Goldstene                       42
         Staff Presentation                                44
         Q&A                                               61
         Ms. Wang                                          72
         Mr. Nordheim                                      74
         Mr. Busterud                                      76
         Mr. Frost                                         77
         Mr. Jordan                                        78
         Ms. May                                           80
         Mr. McLaughlin                                    83
         Mr. Torres                                        85
         Mr. Fischer                                       86
         Mr. Wallerstein                                   89
         Mr. Ross                                          91
         Mr. Quetin                                        94
         Mr. Little                                        95
         Mr. White                                         97
         Ms. McQueen                                      100
         Mr. Klatt                                        102
         Mr. Anair                                        105


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             vii

                          INDEX CONTINUED
                                                          PAGE


         Mr. O'Conner                                     106
         Mr. Markolf                                      108
         Mr. Miller                                       111
         Mr. Clarke                                       112
         Ms. Holmes-Gen                                   113
         Ms. Reheis-Boyd                                  114
         Q&A                                              117
         Motion                                           134
         Vote                                             134

    Item 7-12-4
         Chairperson Nichols                              135
         Executive Officer Goldstene                      135
         Staff Presentation                               135
         Ms. Whynot                                       147
         Ms. Reheis-Boyd                                  148
         Mr. Pedersen                                     150
         Mr. Edgar                                        151
         Mr. Knapp                                        154
         Mr. White                                        155
         Mr. Busterud                                     158
         Mr. Little                                       160
         Mr. Miller                                       162
         Ms. Wang                                         164
         Mr. O'Conner                                     164
         Motion                                           168
         Vote                                             168

    Item 7-12-5
         Chairperson Nichols                              173
         Executive Officer Goldstene                      174
         Staff Presentation                               175
         Q&A                                              181
         Motion                                           182
         Vote                                             182

    Item 7-12-6
         Chairperson Nichols                              182
         Executive Officer Goldstene                      183
         Staff Presentation                               185
         Q&A                                              210
         Ms. Lee                                          218
         Ms. Bailey                                       220
         Ms. Holmes-Gen                                   225
         Mr. Kaltenstein                                  226


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             viii

                          INDEX CONTINUED
                                                          PAGE

         Mr. Hogo                                         228
         Mr. Davis                                        232
         Mr. Johns                                        234
         Mr. Witten                                       235
         Ms. Williams                                     235
         Mr. Flanagan                                     238
         Mr. Jelenic                                      240
         Mr. Carmichael                                   244
         Mr. Garrett                                      247
         Ms. Shahenan                                     251
         Mr. Norton                                       254
         Mr. Tsurumi                                      256
         Ms. Patel                                        258
         Mr. Hoffman                                      260
         Mr. Lyons                                        263
         Ms. Mitchell                                     265
         Mr. Anair                                        265
         Q&A                                              268
         Motion                                           295
         Vote                                             299

    Item 7-12-10
         Chairperson Nichols                              299
         Executive Officer Goldstene                      300
         Staff Presentation                               302
         Mr. Anair                                        324
         Ms. Flanagan                                     326
         Ms. Nicholes                                     329
         Ms. Fugere                                       330
         Ms. Holmes-Gen                                   334
         Mr. Emmett                                       337
         Mr. Carmichael                                   338
         Q&A                                              340
         Motion                                           352
         Motion                                           356
         Vote                                             370


    Adjournment                                           371
    Reporter's Certificate                            372


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             1

 1                          PROCEEDINGS

 2            CHAIRPERSON NICHOLS:  Good morning, and welcome

 3  everybody to the last meeting for 2007 of the Air

 4  Resources Board.  It has been an eventful year.  I'm not

 5  going to give you my state of the Air Resources Board

 6  report.  We'll do that in January.  But I do want to

 7  welcome you.

 8           And this is not a room that I've ever used for a

 9  meeting before.  So logistics are a little unfamiliar.

10  But if you can't hear, let us know.

11           We do have a court reporter, who's over here.

12  And we'll be making sure to take care of her because she's

13  the most important person actually in the meeting.

14           And if you're here because you want to speak on

15  an item, the Clerk of the Board is over on this side.  And

16  we do ask you to fill out a card on the item that you want

17  to speak on so we can be sure that we call on you and also

18  that we can budget our time.  We've got a very packed

19  agenda today, and we must end by 7:30.  I know that will

20  be a relief for some of you to know that we will be ending

21  this evening.

22           Okay.  Well, let's start out with a roll call and

23  then we'll do the Pledge of Allegiance to the flag.  Make

24  sure we have a quorum.

25           SECRETARY ANDREONI:  Ms. Berg?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             2

 1           BOARD MEMBER BERG:  Here.

 2           SECRETARY ANDREONI:  Supervisor Case?

 3           BOARD MEMBER CASE:  Here.

 4           SECRETARY ANDREONI:  Ms. D'Adamo?

 5           BOARD MEMBER D'ADAMO:  Here.

 6           SECRETARY ANDREONI:  Supervisor Hill?

 7           SUPERVISOR HILL:  Here.

 8           SECRETARY ANDREONI:  Ms. Kennard?

 9           BOARD MEMBER KENNARD:  Here.

10           SECRETARY ANDREONI:  Mayor Loveridge?

11           Ms. Riordan?

12           BOARD MEMBER RIORDAN:  Here.

13           SECRETARY ANDREONI:  Supervisor Roberts?

14           BOARD MEMBER ROBERTS:  Here.

15           SECRETARY ANDREONI:  Professor Sperling?

16           BOARD MEMBER SPERLING:  Here.

17           SECRETARY ANDREONI:  And Chairman Nichols?

18           CHAIRPERSON NICHOLS:  Here.

19           SECRETARY ANDREONI:  Chairman Nichols, we have a

20  quorum.

21           CHAIRPERSON NICHOLS:  Thank you very much.

22           And I'll now ask everybody to rise and face the

23  flag and we'll say the Pledge of Allegiance.

24           (Thereupon the Pledge of Allegiance was

25           recited in unison.)


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             3

 1           CHAIRPERSON NICHOLS:  We'll start as we normally

 2  do with a health update.  And I guess they'll lead us off,

 3  Mr. Goldstene.

 4           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

 5  Nichols.

 6           In previous updates staff has described the

 7  impacts of air pollution on public health, including

 8  increased risk of premature death, hospital admissions for

 9  respiratory and cardiovascular disease, asthma symptoms,

10  acute bronchitis, and hardening of the arteries.

11           Evidence has been published suggesting that

12  exposure to air pollution might also be associated with

13  adverse effects on the brain.  Today staff will report on

14  several recent studies to show possible associations

15  between air pollution exposure and inflammation and other

16  adverse effects on the brain.  The findings presented in

17  this update suggest that adverse health effects associated

18  with air pollution are even more wide ranging than

19  previously thought.

20           Dr. Lori Miyasato from our Health and exposure

21  Assessment Branch will make the staff presentation.

22           CHAIRPERSON NICHOLS:  Thank you.

23           (Thereupon an overhead presentation was

24           presented as follows.)

25           DR. MIYASATO:  Thank you, Mr. Goldstene.  Good


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             4

 1  morning, Chairman Nichols and members of the Board.

 2  In this health update, I will provide a brief summary of

 3  recent preliminary findings of adverse effects on the

 4  brain associated with long-term exposure to air pollution.

 5                            --o0o--

 6           DR. MIYASATO:  In previous health updates the

 7  Board has heard about numerous adverse health effects

 8  associated with exposure to air pollution.  For example,

 9  air pollutant exposure has been linked to premature death,

10  hospitalizations for respiratory and cardiovascular

11  conditions, asthma symptoms, acute bronchitis, and

12  atherosclerosis.  These health outcomes are the result of

13  effects on the heart, circulatory system, and lungs.

14           However, air pollutants may affect other organs

15  of the body such as the brain.  Information on the effects

16  of air pollutants on the brain is just now coming to

17  light, and today we will summarize findings discussed in a

18  recent review article by Calderón-Garcidueñas and

19  colleagues.

20                            --o0o--

21           DR. MIYASATO:  Although inhaled pollutants can

22  exert adverse effects directly on the lungs and heart, the

23  healthy brain is well protected against toxins by a

24  specialized membrane that usually allows entry only to

25  beneficial substance.  However, recent studies suggest


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             5

 1  that inhaled ultrafine particles may be capable of

 2  bypassing this barrier.

 3           It is possible that inhaled particles may be

 4  transported along nerves that travel directly from the

 5  nasal passages into the brain, as shown in this simplified

 6  schematic figure.  The white line represents the pathway

 7  of inhaled particles.

 8           Another possibility is that ultrafines may enter

 9  the brain by a more circuitous route by inhalation into

10  the lungs and subsequent transport via the bloodstream,

11  shown here in red, into the brain.

12           Alternatively, air pollutants may be able to

13  exert effects on the brain without actually gaining entry

14  to it.

15           Inhaled pollutants, such as fine particulates and

16  ozone, may cause an inflammatory reaction in the lung.

17  This in turn may result in chemical factors being released

18  into the bloodstream and subsequently being transported to

19  the brain, as seen here, where the dashed green line

20  represents the route of the inflammatory chemical factors.

21                            --o0o--

22           DR. MIYASATO:  Evidence of the effects of chronic

23  air pollution on the brain comes from several studies

24  performed in Mexico.  Researchers compared the brains of

25  accidental death victims, both adults and children, from


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             6

 1  cities with highly polluted ambient air versus cities with

 2  relatively clean air.  Similar studies were performed on

 3  healthy domestic dogs.  The more polluted cities typically

 4  had ozone and particulate matter levels above our national

 5  ambient air quality standards.  The results of these

 6  studies showed that levels of inflammatory markers and

 7  abnormal protein deposits were higher in the brain tissue

 8  of those from the highly polluted versus the relatively

 9  clean cities.  Both of these changes resemble those that

10  typically precede Alzheimer's disease.  However, these

11  changes do not necessarily imply the onset of disease.

12           The figure on the right side of this slide shows

13  brain tissue from a 36-year-old man from Mexico City.

14  Arrows point out locations of abnormal protein deposits.

15  In a normal healthy brain, the tissue would appear more

16  uniform in color and texture.

17           In a separate study conducted in Los Angeles by

18  Campbell and colleagues, brains of mice exposed to

19  concentrated ambient particles showed elevated levels of

20  chemical markers that may precede inflammation.  This

21  suggests that particulate matter is the component in the

22  air pollution mix responsible for the increases in

23  inflammatory markers seen in the studies conducted in

24  Mexico.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             7

 1           DR. MIYASATO:  In conclusion, the studies

 2  discussed today suggest that air pollution exposure may be

 3  associated with adverse effects on the brain in both

 4  humans and animals.  These effects include increased

 5  levels of inflammatory markers and abnormal protein

 6  deposits in brain tissue.  And the results suggest that

 7  both adults and children may be at risk.

 8           These findings also suggest that adverse health

 9  effects related to air pollution exposure may be more far

10  reaching than previously thought.  Therefore, it is

11  important that these linkages be rigorously investigated

12  through additional research.

13           On a positive note, levels of ambient PM are

14  decreasing in California.  However, results such as those

15  presented today illustrate that continued reductions of

16  both gaseous and particulate pollution are needed to

17  protect public health.

18           This concludes the health update.  We will be

19  happy to answer any questions.

20           Thank you.

21           CHAIRPERSON NICHOLS:  This is very interesting.

22           Any questions from any Board members about the

23  studies?

24           Hearing none.

25           Thank you.  We will be better informed.  This is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             8

 1  a relatively new area for research, I think, and the

 2  effects.  So it's good to know about.

 3           MR. LLOYD:  Chairman Nichols?

 4           CHAIRPERSON NICHOLS:  Yes.

 5           MR. LLOYD:  Bob Lloyd, we're videotaping the

 6  proceedings today.

 7           The digital sound you're hearing in the audio

 8  system is a result of Blackberries and iPhones.  So if you

 9  have a Blackberry or an iPhone, if you could shut them

10  off.

11           Excuse me for the interruption.

12           CHAIRPERSON NICHOLS:  All right.  Thank you.

13           We will now move to our next item, which is the

14  appointment to replace a member of the Economic and

15  Technology Advancement Advisory Committee.

16           And who's presenting that one?

17           EXECUTIVE OFFICER GOLDSTENE:  Ma'am, I'll present

18  that.

19           CHAIRPERSON NICHOLS:  Okay, great.

20           EXECUTIVE OFFICER GOLDSTENE:  Thank you.

21           The Global Warming Solutions Act directed ARB to

22  form two advisory committees, an environmental justice

23  advisory committee and an economic and technology

24  advancement advisory committee, or ETAAC.  The Board

25  formed these committees and appointed the members in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                             9

 1  January of this year.

 2           Both committees have been working very hard since

 3  then, as you know.  ETAAC in particular has been busy

 4  meeting, gathering information, and drafting a report

 5  containing its advice to the Board regarding the best

 6  technologies for controlling greenhouse gases in

 7  California and the best ways to promote those

 8  technologies.  The members appointed to ETAAC by the Board

 9  were chosen for their expertise in areas important to the

10  task.  They're scheduled to bring their final report to

11  the Board in January.

12           The ETAAC member appointed to represent the

13  California Chamber of Commerce recently resigned from his

14  position with the Chamber.  So staff believes his

15  continued membership on the Committee would not be in

16  keeping with the Board's original purpose for his

17  appointment.  Therefore, staff requests that the Board

18  approve a replacement and recommends Ms. Amisha Patel,

19  also of the Chamber of Commerce, to fill the position.

20           CHAIRPERSON NICHOLS:  Thank you.

21           Ms. Patel has actually appeared before this Board

22  on several occasions.

23           EXECUTIVE OFFICER GOLDSTENE:  Several times,

24  yeah.

25           CHAIRPERSON NICHOLS:  And she's done a very good


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            10

 1  job.  And I think it's important that we allow the

 2  Committee to finish its work.  They're not yet quite ready

 3  to present us with their final report, as I understand,

 4  although they're working their way through

 5  recommendations.

 6           So I think this is a good move and will hopefully

 7  make sure that they get their work done on time.

 8           Are there any questions or comments on this?

 9           BOARD MEMBER RIORDAN:  Madam Chair, I would then

10  move the staff recommendation which would appoint her to

11  our Technical Advancement Advisory Committee.

12           CHAIRPERSON NICHOLS:  Very good.

13           Do we have a second?

14           BOARD MEMBER D'ADAMO:  Second.

15           CHAIRPERSON NICHOLS:  Second.

16           All in favor say aye.

17           (Ayes)

18           CHAIRPERSON NICHOLS:  Any objections?

19           Hearing none.

20           That is done.

21           And then we'll move to the next item, which is

22  another update.  One of a series of semi-annual updates on

23  recent and significant findings in the climate change

24  research.  And this is very timely, as the state is moving

25  forward on implementation of AB 32.  And I'm getting ready


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            11

 1  to take off on Saturday to be part of the state's team

 2  representing us in the global UN meetings in Bali,

 3  Indonesia, on this issue.  It's good to know that we're

 4  being backed up by a tremendous amount of work here at

 5  home.  And that's one of the things that we're there to

 6  talk about is what's going on both in California at the

 7  state and the local level, and to reassure other countries

 8  and interests that we'll be working with in the future

 9  that there is interest and commitment in this country in

10  working on these issues.

11           So this is a report on some of the strives that

12  are being made by cities and counties.

13           And, Mr. Goldstene, would you please introduce

14  this item.

15           EXECUTIVE OFFICER GOLDSTENE:  Yes, well -- thank

16  you, Chairman Nichols.

17           Before I introduce this item, I'd like to make

18  sure the Board is aware of the upcoming workshops that we

19  have relative to the development of the Scoping Plan.

20           Last Friday, at the South Coast Air Quality

21  Management District offices at Diamond Bar, the staff held

22  the first of four formal workshops devoted to the

23  development of the Scoping Plan.  The workshop was very

24  well attended and went over the basic structure of what

25  the scoping plan will look like.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            12

 1           This coming -- or next Friday, a week from

 2  tomorrow, the second workshop will be held in Sacramento

 3  to provide a snapshot view of the sectors responsible for

 4  the largest percentage of greenhouse gas emissions in the

 5  state.

 6           The workshop on the 14th will also provide an

 7  overview of potential emission reduction strategies.

 8           The third workshop that's coming up will be held

 9  on January 16th in Oakland and will focus on the possible

10  mechanisms available to achieve the 2020 emission

11  reduction targets, including direct regulations,

12  market-based mechanisms, voluntary actions, and

13  incentives.

14  And the fourth workshop on March 24th we'll be holding a

15  scenario workshop to explore the different emission

16  reduction strategies and how they could possibly work

17  together.

18           All of this will culminate in the report

19  hopefully completed by June, which will be the first look

20  at the overall scoping plan.

21           So I wanted to make sure the Board members knew

22  that we had that all going on.

23           Now, with regard to this item, today's

24  presentation will discuss the important role local

25  organizations play in addressing climate change as well as


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            13

 1  the partnerships we're fostering with local governments

 2  and organizations to meet greenhouse gas reduction

 3  targets.

 4           California cities and counties are taking the

 5  lead in identifying reduction targets and aggressive plans

 6  to achieve them.  The presentation today will highlight

 7  how cities around California are actively addressing

 8  climate change and the specific actions underway from

 9  small communities to big cities.  Local governments and

10  organizations are taking action to fight global warming.

11  The Air Resources Board is working with these

12  organizations and cities and counties in establishing

13  collaborative efforts to work on identifying best

14  practices and public awareness campaigns.

15           Ms. Annmarie Mora, Manager of the Research

16  Planning and Climate Change Outreach Section in the

17  Research Division, will make the staff presentation.

18           CHAIRPERSON NICHOLS:  Thank you.

19           Ms. Mora.

20           (Thereupon an overhead presentation was

21           presented as follows.)

22           RESEARCH DIVISION MANAGER MORA:  Thank you, Mr.

23  Goldstene.

24           Good morning, Chairman Nichols and members of the

25  Board.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            14

 1           Today's climate science update is a little

 2  different from the previous updates.  We'll be giving a

 3  good news story requested by the late Dr. Gong.  It is a

 4  story about the commitment local entities have made or are

 5  making to assist in the fight against global warming.

 6  Several California cities and businesses are addressing

 7  this challenge head on.  Today's presentation will cover

 8  how we will work with these leaders and how state and

 9  local efforts will come together to meet the targets of

10  the 2006 Global Warming Solutions Act.

11           Local action is one of the 44 Early Actions that

12  you approved earlier this year.

13                            --o0o--

14           RESEARCH DIVISION MANAGER MORA:  The presentation

15  will describe the important role of cities, counties,

16  business and individuals in addressing climate change.  We

17  will highlight some commendable local leadership already

18  taking place, and describe our road map for achieving

19  further greenhouse gas reductions at the local level.  The

20  effort we will describe will focus on municipal and

21  community operations.  We realize that substantial

22  reductions will come from land use and transportation, but

23  this will require fundamental changes in how decisions are

24  made at local, regional, and state levels.  Therefore, the

25  issue of land use will mostly be left to the Scoping Plan.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            15

 1                            --o0o--

 2           RESEARCH DIVISION MANAGER MORA:  Local officials

 3  recognize the impact of climate change on their cities and

 4  residents and the importance of taking action now.  The

 5  reality is that oftentimes local governments have the

 6  authority to make decisions that state and the federal

 7  government do not, including decisions about zoning, city

 8  energy portfolios, municipal sewage and water facilities,

 9  and climate-friendly purchases such as fleet vehicles that

10  use alternative fuels.  These actions can also have

11  substantial co-benefits.  For example, incentivizing solar

12  roof projects not only reduces greenhouse gas emissions.

13  They also reduce air pollution and likely would reduce

14  asthma and respiratory illnesses.

15           Finally, actions implemented at the local level

16  bring greater awareness of the issue to residents and are

17  more likely to inspire action both among residents and

18  surrounding municipalities.

19                            --o0o--

20           RESEARCH DIVISION MANAGER MORA:  National efforts

21  that California can look to for leadership on engaging

22  local governments in greenhouse gas reduction programs

23  include the US Conference of Mayors and that of ICLEI,

24  Local Governments for Sustainability.

25           Two years ago Seattle Mayor Greg Nickels


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            16

 1  introduced the Mayors Climate Protection Agreement.  The

 2  agreement pledges to meet or exceed the Kyoto protocol

 3  standards.  With over 700 signatories representing close

 4  to 75 million Americans, the agreement has inspired a

 5  national movement.  To take the pledge cities must commit

 6  to meet or beat Kyoto protocol targets in their own

 7  communities as well as urge their state government and the

 8  federal government to do the same and encourage the

 9  establishment of a national emissions trading system.

10           As noted on this slide, there are 108 California

11  cities that have signed the Climate Protection Agreement.

12                            --o0o--

13           RESEARCH DIVISION MANAGER MORA:  Another

14  significant program was initiated by ICLEI, an

15  international association of local governments.  Since

16  1993, ICLEI has assisted cities in adopting policies and

17  implementing quantifiable measures to reduce local

18  greenhouse gas emissions, improve air quality, and enhance

19  urban livability and sustainability.  More than 800 local

20  governments participate in the Cities for Climate

21  Protection Campaign, integrating climate change mitigation

22  into their decision-making processes.  To date, 377 US

23  local governments participate in the campaign, including

24  82 California local governments encompassing an estimated

25  40 percent of California residents.  As of 2005, $535


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            17

 1  million have been saved in energy and fuel costs to local

 2  governments following the Cities for Climate Protection

 3  Campaign guidelines.

 4                            --o0o--

 5           RESEARCH DIVISION MANAGER MORA:  For the next

 6  part of the presentation, I will discuss ARB's road map

 7  for achieving further local greenhouse gas emission

 8  reductions.  Our road map is evolving and begins with

 9  working collaboratively with stakeholders to coordinate

10  ongoing statewide efforts.  Because of the significant

11  amount of ongoing activity, a key aspect of our effort

12  will be coordination, promoting synergisms and integration

13  into the overall state effort under AB 32.  Through our

14  collaborations we will identity existing tools or develop

15  new tools to quantify greenhouse gas emissions, assess and

16  promote best practices, develop outreach programs, and

17  identity additional opportunities for meeting the 2050

18  target.  These efforts will be condensed into the early

19  action local guidance that we will bring to the Board

20  September 2008.

21                            --o0o--

22           RESEARCH DIVISION MANAGER MORA:  State efforts on

23  local action pursuant to AB 32 are underway.  This slide

24  illustrates the relationship between the Scoping Plan, the

25  Land Use Subgroup of the Climate Action Team, also known


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            18

 1  as LUSCAT, and our Local Early Action items.  The Scoping

 2  Plan will outline how we as a state will meet the targets

 3  of AB 32 and provide the analytical methods for the

 4  strategies we will use.  The LUSCAT will guide the short

 5  and long term state agency efforts for measurable

 6  reductions related to local government and land use.  As

 7  you can see, there will be focused efforts on addressing

 8  the local government decisions for land use and municipal

 9  and community operations.  The intersection between all

10  three working groups will yield tools and strategies that

11  will allow local entities to participate in addressing

12  climate change.

13                            --o0o--

14           RESEARCH DIVISION MANAGER MORA:  In addition to

15  learning from national examples, we at ARB are in the

16  process of forming working relationships with the

17  organizations listed here on this slide.  Many of these

18  organizations have already instituted excellent programs

19  that facilitate greenhouse gas reductions among local

20  governments and businesses.  We expect that these

21  partnerships will play a fundamental role in helping shape

22  the development of state guidance and protocols.

23           We look forward to working with additional

24  stakeholders as our efforts progress.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            19

 1           RESEARCH DIVISION MANAGER MORA:  One of the first

 2  steps to reducing emissions is the ability to measure

 3  them.  Next I will discuss some of the tools we are

 4  exploring to quantify emissions on a community basis.

 5  These are bottom-up methods that meet the rigor of

 6  realized approaches.

 7                            --o0o--

 8           RESEARCH DIVISION MANAGER MORA:  The California

 9  Climate Action Registry, or CCAR, has developed protocols

10  to calculate, report, and certify greenhouse gas emission

11  inventories.  Registry participants include businesses,

12  nonprofit organizations, municipalities, state agencies,

13  and other entities.  Over 300 California governments and

14  businesses report direct and indirect emissions of

15  greenhouse gases to CCAR.  ARB will be contracting with

16  CCAR for specific municipal and community protocols.

17           Another tool being developed will quantify energy

18  use and greenhouse gas emissions for buildings.  It is a

19  GIS-based local, state, and federal transportation, land

20  use, and natural resource planning tool called UPLAN.  It

21  was developed at UC Davis and is currently available for

22  all counties in California.  UPLAN could be used to

23  protect building energy use and greenhouse gas emissions

24  for various county land use and transportation scenarios.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            20

 1           RESEARCH DIVISION MANAGER MORA:  We believe

 2  cities and businesses could utilize a reliable

 3  benchmarking tool.  It would facilitate energy accounting,

 4  comparing a facility's energy use to similar facilities in

 5  order to assess opportunities for improvement, and

 6  quantifying and verifying energy savings.  Cal-Arch,

 7  developed by Lawrence Berkeley National Lab, is a tool for

 8  benchmarking whole-building energy for California

 9  commercial buildings.

10           In isolation, benchmarking can inspire action but

11  provides no practical guidance.  LBNL intends to bridge

12  that gap with their energy IQ tool which will provide a

13  standardized opportunity assessment based on benchmarking

14  results, along with decision-support information to help

15  refine action plans.

16           Related to this effort, the State of California

17  will benchmark all state-owned buildings.

18           Assessments can also be done with consumer carbon

19  calculators.  They can be used to quantify emissions and

20  find suggestions for making reductions at a personal

21  level.  For example, the Home Energy Saver is a tool to

22  help consumers identity ways to save energy in their

23  homes.

24           At a state level, we have partnered with UC

25  Berkeley, LBNL, and Next10 to create a unified calculator


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            21

 1  for California that uses California-specific factors to

 2  calculate the potential CO2 impact of everyday activities.

 3  The user will be able to produce a report summarizing the

 4  inputs and calculated emissions and provide suggestions

 5  for reducing their carbon footprint.

 6           An initial version will be available in January

 7  and a fully integrated calculator will be completed by

 8  summer of 2008.

 9                            --o0o--

10           RESEARCH DIVISION MANAGER MORA:  In addition to

11  the tools, we believe it's important to assess existing

12  strategies and recommend some best practices that could be

13  undertaken at a local level.

14                            --o0o--

15           RESEARCH DIVISION MANAGER MORA:  One of the

16  strategies we will look at is the effectiveness of climate

17  action plans.  Many cities are using the climate action

18  plan framework provided by ICLEI to work towards reducing

19  their greenhouse gas emissions.  But to date there isn't a

20  state-endorsed template.

21           Action plans can identify steps a city or county

22  can take to meet a reduction target, and include a plan to

23  monitor and verify emission reductions.  Most plans also

24  include climate change education and outreach programs.

25           As a potential best practice, we would like to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            22

 1  assess the various climate action plans and work towards a

 2  single template for potential statewide use.

 3                            --o0o--

 4           RESEARCH DIVISION MANAGER MORA:  Another

 5  significant strategy that has a direct effect in reducing

 6  greenhouse gas emissions is the promotion of green

 7  building practices.  Buildings account for the highest

 8  proportion of energy consumption and greenhouse gas

 9  emissions.  Consequently they represent the greatest

10  opportunity for obtainable energy efficiency improvements.

11  Not only are green building designs more energy efficient;

12  they are also healthier, profitable, and environmentally

13  responsible places to live and work.  LEED, Leadership in

14  Energy and Environmental Design, is a voluntary

15  consensus-based national rating system for developing high

16  performance sustainable buildings.  Developed by the US

17  Green Building Council, LEED addresses all building types

18  and emphasizes state-of-the-art strategies for sustainable

19  site development, water savings, energy efficiency,

20  materials and resources selection, and indoor

21  environmental quality.

22           A couple of examples include the Cal/EPA

23  headquarters building in Sacramento, which you are

24  familiar with.  It is LEED platinum certified and energy

25  savings add up to approximately $1.5 million a year.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            23

 1           In San Jose they built the world's first green

 2  library, which is LEED-certified, which uses 30 percent

 3  less energy and 50 percent less irrigation water than

 4  standard buildings.

 5                            --o0o--

 6           RESEARCH DIVISION MANAGER MORA:  There are

 7  several best practices that ARB will assess to help

 8  businesses reduce and/or offset their greenhouse gas

 9  emissions, such as promoting green purchasing.  This would

10  follow California's requirement that all government

11  agencies practice environmentally preferable purchasing,

12  which means the purchase of products that are long

13  lasting, high quality, less toxic, reusable, and easy to

14  recycle and use less materials, water, and energy.  ARB

15  could also promote reliance on and investment in renewable

16  energy.  Businesses have already demonstrated initiative

17  in this area.  Currently, Google is constructing the

18  largest solar installation on a US corporate campus.  If

19  it's not possible for businesses to rely directly on

20  renewable energy, a second strategy, as demonstrated by

21  whole foods, is for ARB to promote the offsetting of

22  electricity used via the purchase of renewable energy

23  credits.  Another avenue that ARB will pursue is promoting

24  green business practices, such as strategies implemented

25  by Wal-Mart to improve fleet efficiency.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            24

 1                            --o0o--

 2           RESEARCH DIVISION MANAGER MORA:  There are also

 3  climate friendly transportation decisions that could be

 4  implemented by more cities and businesses.

 5           In Santa Monica, more than 80 percent of their

 6  municipal fleet runs on cleaner and more sustainable fuel

 7  alternatives, including electricity, natural gas,

 8  hydrogen, biodiesel, and gas-electric hybrids.

 9           The City of Los Angeles and its employee

10  bargaining units agreed to a unique arrangement regarding

11  computer benefits and employee parking.  Parking fees from

12  solo drivers are used to support ride-share programs.

13  Parking permit fees are deposited in an interest-earning

14  Ride Share Trust Fund.  The computer service office uses

15  money from the fund for services like subsidizing van

16  pools and employee transit passes.

17                            --o0o--

18           RESEARCH DIVISION MANAGER MORA:  We are striving

19  to promote interest in climate change protection, seeking

20  new ideas for emissions reductions, and inspiring young

21  people who will inherit the challenges and opportunities

22  for solving the climate crisis.  Public awareness and

23  participation is key in effectively motivating behavior

24  change and linking local action to statewide efforts.

25  ARB's main objectives in this area are to provide guidance


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            25

 1  for estimating and reporting greenhouse gas emissions and

 2  facilitate overall actions to reduce carbon footprint.

 3           Drawing from a number of lists available on the

 4  web that describe actions that individuals can take to

 5  reduce their carbon footprint and as part of our local

 6  action strategy, ARB is working with CAPCOA and CEC in

 7  developing our own list of 12 simple and cost-effective

 8  actions.  ARB will also develop a portal for web-based

 9  resources and information about strategies to reduce

10  greenhouse gas emissions.

11           Looking at the Climate Change Champions program

12  in the UK as an example, we aspire to develop a school

13  competition program that fosters greenhouse gas emissions

14  reductions.  The Champions program is an annual

15  competition to find outstanding young people who could

16  represent England on climate change and who can become the

17  voice of young people on this issue.

18                            --o0o--

19           RESEARCH DIVISION MANAGER MORA:  Besides the UK

20  Champions program, there are other international examples

21  to look to for inspiration.  As ARB moves forward, we are

22  looking globally for concrete examples of achieving

23  significant greenhouse gas reductions for 2050.

24                            --o0o--

25           RESEARCH DIVISION MANAGER MORA:  Here I point to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            26

 1  three cosmopolitan cities that have currently achieved

 2  impressive CO2 emission reductions.  Over a period of four

 3  years, Denmark achieved a 15 percent reduction in CO2

 4  emissions.  National officials attribute this decrease to

 5  changes in fuel use, increased use of combined heat and

 6  power, technologies, and improved energy efficiency.

 7           Over a period of 13 years, the city of Vaxjo,

 8  Sweden, achieved a 30 percent per capita reduction in CO2

 9  emissions.  National officials attribute this decrease to

10  changes in fuel use, particularly reliance on biomass fuel

11  sources for heating, and increased numbers of

12  environmental vehicles in use.

13           In 1996, the town announced its goal to be a

14  Fossil Fuel Free City.  Ten years later they're halfway to

15  this goal.

16           Over a period of 14 years the city of Woking in

17  the UK achieved a 77 percent reduction in CO2 emissions.

18  This is attributed to decentralizing energy supplies by

19  building the first sustainable heating and cooling energy

20  station in the UK and by building the UK's first

21  sustainable energy fuel cell.  A co-benefit of the

22  combined heating and power scheme at Woking's town center

23  has been raising public awareness of the advantages of

24  decentralizing energy.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            27

 1           RESEARCH DIVISION MANAGER MORA:  So our goal is

 2  to bring the proposal for voluntary local actions to the

 3  Board to be endorsed by the Board.

 4                            --o0o--

 5           RESEARCH DIVISION MANAGER MORA:  To meet that

 6  goal we will continue to work with stakeholders.  A

 7  scoping workshop is planned for February 2008 to meet with

 8  local government officials and business representatives to

 9  discuss financial, institutional, and political barriers

10  in regards to reducing greenhouse gas emissions.  A

11  follow-up workshop is tentatively scheduled for May 2008.

12           We aim to synthesize the components of the road

13  map we have discussed today to present local action

14  guidance to the Board next September.  The guidance will

15  include recommendations for local governments, small

16  businesses, and individuals and encourage an active role

17  in achieving the targets of AB 32.

18           This will just be the first step as we work

19  towards achieving further reductions and meeting the 2050

20  target.

21                            --o0o--

22           RESEARCH DIVISION MANAGER MORA:  Although the

23  accomplishments to date are notable, there are many

24  challenges in motivating voluntary actions to achieve

25  additional reductions.  With a multitude of stakeholders,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            28

 1  coordinating a statewide effort to address climate change

 2  comes with obstacles.  Learning how to inspire and

 3  motivate actions is an area we will be concentrating on by

 4  working with stakeholders to identity effective approaches

 5  such as incentivizing actions and rewarding and

 6  recognizing voluntary efforts.

 7           To meet the goals of AB 32, it will be critical

 8  to be able to verify reductions and track progress.

 9  Establishing emissions inventories may have financial

10  challenges for local governments and businesses as well as

11  the process of verifying emissions reductions achieved.

12  We will work closely with others to determine the most

13  effective mechanisms for crediting and verifying

14  reductions as appropriate.

15           Again, we acknowledge land use and transportation

16  decisions require fundamental change to achieve the

17  long-term goals.  This will demand a concerted effort by

18  state, regional, and local officials in close

19  collaboration with a broad spectrum of stakeholders.  We

20  plan to work with stakeholders to address this critical

21  issue in the Scoping Plan.

22                            --o0o--

23           RESEARCH DIVISION MANAGER MORA:  Today's

24  presentation featured the role local government and

25  business have in addressing climate change, how


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            29

 1  municipalities are taking the lead, and how by working

 2  together Californians are paving the way to a brighter

 3  future.  We will leave no city or business behind as we

 4  strive to meet the goals of the 2006 Global Warming

 5  Solutions Act.

 6           Thank you for your attention.  We'd be happy to

 7  answer any questions.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           I'm sure there are going to be a number of

10  questions, and we'll have to, because of all the other

11  matters, keep this a little bit brief.  But I have a

12  couple of things that I want to raise with you initially.

13           The first is that you've done a terrific job of

14  presenting a very well-thought-through and well-organized

15  program.  And I think it's very reassuring to see the

16  number of bases that you are touching and what's being

17  included in this.  And I think it will continue to be the

18  kind of, you know, thorough, careful rollout of a program

19  that the ARB is known for.  So I really want to commend

20  you for it.

21           Secondly, I know that there's a lot of other

22  things going on in other places that we are not in control

23  of this issue, nor should we be, either on the voluntary

24  level or in terms of other agencies that have regulatory

25  authority.  And I'm constantly being reminded that there


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            30

 1  are local air districts, there are other agencies.  There

 2  are private citizen groups who are interested in finding

 3  ways to push further, faster than even this program, which

 4  is on a pretty expedited basis, can go.  And one of those

 5  efforts that's going on now I know is intended to feed

 6  into the Scoping Plan, and that's the work that's going on

 7  under the leadership of the CEC and OPR, looking at

 8  land-use measures as a way of actually achieving

 9  quantifiable reductions.  And they are looking at some

10  measures which are mandatory I believe and making

11  recommendations at least that would include things like

12  assigning emissions reduction targets to various areas and

13  coming up with state incentives at least in terms of

14  funding to enforce those kinds of programs.

15           So are you coordinating with that effort?  Or how

16  are these two things working together?  Maybe I should ask

17  Mr. Goldstene about this.  These are obviously relevant --

18  related to each other.

19           EXECUTIVE OFFICER GOLDSTENE:  Right, they're very

20  closely related.  I think today's presentation was to give

21  the Board an overview of what we've done so far and the

22  groups we're working with.  We are also looking at --

23  well, we've been working closely with the Office of

24  Planning and Research and also the transportation

25  agencies, which were not highlighted today but we'll be


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            31

 1  reporting on that in the future.  But we are engaging --

 2           CHAIRPERSON NICHOLS:  Okay.  So this is just

 3  really the internal work that's being done within ARB?

 4           EXECUTIVE OFFICER GOLDSTENE:  Yeah, at this

 5  point.

 6           CHAIRPERSON NICHOLS:  And we're also coordinating

 7  with all these other activities that are going on.

 8           Okay.  That's very helpful.

 9           The other thing that I noticed that was left off

10  the list -- and I know this is very challenging.  But it

11  seems to me that ARB ought to be assuming more of a

12  leadership role ourselves than we have been in moving

13  towards climate neutrality.  And I know there are legal

14  issues associated with what an agency can do.  I know we

15  have to have the Department of Finance willing to let us

16  invest in some things and perhaps look at even offsetting

17  travel and issues like that.  But it seems to me that it

18  wouldn't be hard to get a small team of people within the

19  agency who are interested in this topic, since people stop

20  me about this all the time in the hallways and elevators

21  to talk about it, to take a look at how we assess our

22  own -- I know we've already done the basic assessment of

23  what our carbon footprint is, but to look at what we could

24  do to then take that to the next step and actually join

25  the worldwide movement of people who are trying to make


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            32

 1  themselves climate neutral.

 2           So I'd like to propose that as a direction from

 3  the Board to ask the staff to look at and to come back to

 4  us perhaps in the next six month report and let us know --

 5  I'm seeing head nodding here -- what we can come up with.

 6           So that's just a couple of initial thoughts.  And

 7  I'm sure others have more.  I saw at least one hand up

 8  down here, so I'll start with you.

 9           Professor Sperling.

10           BOARD MEMBER SPERLING:  Well, let me support the

11  proposal for ARB taking leadership.

12           I do want to -- you know, I thought that was a

13  great presentation.  You know, I really appreciated it.

14  It is on a very difficult topic.  And let me use that as

15  kind of a launching point to why this is important, you

16  know, very briefly, and what it means, is -- you know,

17  there's been a lot of initiatives but they're almost all

18  voluntary.  And that's a good start.  But I think what

19  we've learned is that there have to be incentives and

20  constraints.  We need to deal with -- you know, the world

21  is going to be changing.  And to get the 25 percent

22  reduction by 2020 and the much larger ones beyond that is

23  going to require some major changes.  And it doesn't mean

24  it's going to cost much, but it does mean changes in

25  behavior and changes in the way things are done.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            33

 1           And so I think what we need to be going toward is

 2  some kind of durable framework that sends consistent

 3  signals to cities and households and individuals and

 4  businesses, and to be thinking about this.  And, you know,

 5  I just want to highlight some of the -- or there are some

 6  ideas, you know, that were referred to vaguely in the

 7  presentation and that Chairman Nichols was referring to

 8  also.  And so what I'd like to do is encourage people, you

 9  know, especially in the counties and the cities and local

10  businesses to really be engaging in this process.  This is

11  a really important one.  You know, we have this law.  We

12  have the goal.  And it's going to require a lot of

13  creativity.  And it does mean doing things differently in

14  terms of policy, in terms of behavior.

15           So I just want to support, you know, these

16  initials discussions and encourage everyone to participate

17  in them.  So let me just leave it at that.  But to

18  emphasize how important this really is.

19           CHAIRPERSON NICHOLS:  Thank you.

20           Supervisor Hill.

21           SUPERVISOR HILL:  Thank you, Madam Chair.

22           I just wanted to add my agreement to Professor

23  Sperling's comments.  I think local government, at least

24  from my experience, they're hungry.  They're hungry for

25  some direction.  As you can see, in many cases they're


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            34

 1  looking at so many options, so many opportunities that are

 2  out there, but they don't know which ones to grab or

 3  they'll grab this one today and then next week they'll

 4  look at this one and go after that one, thinking that

 5  that's the one that will work.

 6           So I guess that what I'm saying is leadership is

 7  important right now.  And the sooner that we can bring

 8  that connection and tie us together with local government

 9  at every level, I think we're going to see greater

10  successes.

11           So I appreciate this program.  And if we can

12  expedite it as much as possible, it would be great,

13           CHAIRPERSON NICHOLS:  Thank you.

14           Ms. D'Adamo.

15           BOARD MEMBER D'ADAMO:  I agree with everything

16  that's been said.  And just following up on Supervisor

17  Hill's comments, I think that maybe some jurisdictions are

18  hungrier than others for guidance.  And we've seen that

19  with some of the efforts of the Attorney General on CEQA

20  actions, that maybe some communities will be pulled into

21  this sort of a little bit more in a reluctant fashion.

22           And So I'd like to comment on a concern about a

23  piecemeal approach that may be occurring unless we

24  exercise strong leadership.  There may be some communities

25  that will go forward and put a strong program together.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            35

 1  Others may not so much so, and in fact might be moving

 2  along as a result of legal action.  And so I would just

 3  encourage staff to incorporate into its analysis CEQA and

 4  the possible guidance that could be provided under the

 5  direction of OPR, and to just engage in a very

 6  comprehensive effort.  There's a lot of different moving

 7  parts on this.  Many different agencies are involved.  And

 8  anything we can do to integrate as much as possible into

 9  the big picture in the Scoping Plan I think would be very

10  helpful in our exercise of strong leadership.

11           CHAIRPERSON NICHOLS:  Thank you.

12           And I think this goes without saying, but I'm

13  assuming that, you know, you're not trying to do anything

14  to slow down people who have voluntary programs that

15  they'd like to do, but just to make sure that everybody

16  gets a chance to be a part of this.

17           BOARD MEMBER D'ADAMO:  Exactly.  And for those

18  communities that are further behind and that may not have

19  the resources, I think it would be helpful for there to be

20  a one-stop shop; and as much as possible I think that that

21  ought to be us, recognizing obviously that we have to --

22  we need to be working collaboratively with the other

23  agencies that are involved.

24           CHAIRPERSON NICHOLS:  Thank you.

25           BOARD MEMBER CASE:  Madam Chair?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            36

 1           CHAIRPERSON NICHOLS:  Yes.

 2           BOARD MEMBER CASE:  Just in agreement with all

 3  that's been said but also as one of those sitting on this

 4  Board as a local elected official, and I've been a city

 5  mayor in the past and now a county supervisor, I think it

 6  would be really helpful -- I like the comment, "some are

 7  more hungry than others," and that's probably true as we

 8  go into the next couple of years.  Our county is very much

 9  focused on the fiscal picture and the budgeting challenges

10  we're going to have in the next year.  And I think it

11  would be really helpful to have specific tools that allow

12  them to calculate what the footprint is and then a list of

13  options, because no one size fits all for anybody.  But if

14  there were to be developed programs or a list of different

15  methods that could be used to reduce their impact, I think

16  that would be really helpful.  Because I know in terms of

17  gauging the public -- predominantly the public works and

18  our general services within our county, getting their

19  attention as we cut their staffing levels is going to

20  become more challenging.  And I think every county and

21  city will be faced with that.

22           So from our perspective as the State Air

23  Resources Board, I think we could really be helpful in

24  that process by first helping them with determination of

25  what their footprint looks like, whether it's a city or a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            37

 1  county, and then secondly having some selected tools that

 2  they can start making some progress.

 3           CHAIRPERSON NICHOLS:  Well, and as you know and

 4  as the presentation pointed out, a number of the measures

 5  that are at the top of anyone's list are things that

 6  actually save money and require either little or no

 7  up-front investment but just changes in operating

 8  practices.  And many cities of course have done a lot of

 9  this already.  But to the extent that we can help with

10  sharing those best practices and showing some of the ones

11  that may have less staff and less resources ways that they

12  could actually save some money, that would be enormously

13  helpful right now.

14           BOARD MEMBER SPERLING:  But there was an

15  important point that Supervisor Case made.  And that is

16  about whatever we do, we have to be able to measure it.

17  And so -- but, you know, the staff did present some

18  initial work on that, the UPLAN model and what the climate

19  action registry is doing.  And I think it is important to

20  really emphasize those.  Because if we're going to be able

21  to reward cities for what they do and provide incentives

22  and so on, we have to be able to measure -- anything

23  that's done has to be measurable.  And we haven't measured

24  these things in the past.  And so emphasizing the

25  development of these tools in a way that can be used


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            38

 1  easily by the cities and counties is really critical.

 2           But I think, you know, at least some of us are

 3  starting to head in that direction, and the staff I know

 4  understands that well.

 5           CHAIRPERSON NICHOLS:  Thank you.

 6           Well, this is the beginning of a much longer

 7  conversation, and I appreciate that very much.

 8           I'd like to ask the Board's indulgence.  We

 9  normally take public comment at the end of the day,

10  general public comment, that is, not on a specific item.

11  But I was asked earlier this morning to make time

12  available as early in the day as possible for a

13  representative of the trucking industry to come in and

14  make a comment on our ongoing efforts to get that

15  program -- the program dealing with the off-road

16  heavy-duty vehicles up and running.  And with your

17  indulgence, I would like to allow him to do that.

18           If there are other people who are here that have

19  general public comment that is not on an item that's on

20  our agenda, I haven't seen any cards to that effect.  But

21  if someone turns up late in the day, we might have to

22  allow for another period of public comment.  But if not,

23  this will constitute our general public comment period.

24           Okay.  Mr. Lewis.

25           MR. LEWIS:  Thank you, Madam Chairman.  I


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            39

 1  appreciate the indulgence.  And I've got to be at a

 2  meeting at L.A. City Hall to talk about their concerns on

 3  the off-road rule.  So I want to take just a few minutes

 4  to bring all of the Board members up to speed on where we

 5  are with the implementation of the rule.

 6           We are proceeding, as we committed to do at the

 7  July hearing when you adopted the rule, with the

 8  implementation.  And I appreciate the interest of the

 9  Chairman and the efforts of Board Member Berg to

10  facilitate some discussion on some points that we think

11  need to be resolved as a part of the final approval of the

12  rule.

13           We have some serious concerns about the SOON

14  program and the way it's written.  You know, that program

15  got very rushed in the adoption process.  It wasn't fully

16  vetted.  And the longer we look at it, the more serious

17  the problems are in trying to implement it.

18           We've identified, and we've shared with your

19  staff and your Chairman, ten areas and issues that we

20  think need to be resolved, that include things as the

21  funding mechanism and the voluntary nature, eligibility,

22  the length of the contract, the need for inter-district

23  compatibility.  And we've agreed to work pretty intensely

24  with your staff and the air districts, San Joaquin and

25  South Coast, over the next 30 days to try to get those


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            40

 1  resolved.

 2           It's also going to probably require some changes

 3  to the Moyer program to make that SOON program work.  And

 4  I know that Board Member Berg is chairing a committee on

 5  your behalf to make some changes to Moyer.  And we're

 6  going to be participating in that workshop on Monday as

 7  well with some specific suggestions.

 8           We've been having a number of meetings with the

 9  local districts and with your staff about the SOON program

10  and what needs to happen to try and fix it.  I think

11  we're -- there's some agreement that there are certainly

12  some changes that could be made that would make it easier

13  for more contractors to participate.  As you know, the

14  construction industry is suffering a severe economic

15  downturn right now.  Depending on which contractor you

16  talk to, there are -- probably 30 to 60 percent of their

17  fleets are parked.  We expect that to continue until

18  mid-2009, which of course overlaps some of your reporting

19  and compliance dates and is going to make those numbers

20  look quite unusual and exceptional I think at that point.

21  Unfortunately, the bond programs haven't really kicked in

22  yet, so that they're not taking up any of that slack.

23           But you need to know that public works only

24  accounts for about one-third of the construction activity

25  in this state, and it can't take up the slack for the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            41

 1  private work.  And until the private work begins to come

 2  back, we're not going to see these contractors get back to

 3  the kind of activity that we've seen over the last several

 4  years.

 5           We have encouraged your staff to proceed with the

 6  15-day notice on the rule without the SOON program, to

 7  give us some time to make some changes to that SOON

 8  program that can be put out for a subsequent notice.  We

 9  are aware of the April 5th deadline for you to have all of

10  your documentation to the Office of Administrative Law in

11  order for them to undertake their portion of the review.

12  We recognize that.  I think we've committed to your staff

13  to try and have some agreement in place by January 15th to

14  give you adequate time to notice that and put it out for

15  review.

16           We are in the process of surveying all of the

17  contractors to determine who would be able to participate

18  under a SOON-type program and under what conditions they

19  could participate to help us identity those changes that

20  we need to make.  And I believe we're going to be able to

21  come up with some positive changes that will allow the

22  kind of over-compliance and additional reductions that are

23  necessary in those two air districts to meet their needs.

24           I'd appreciate the Board's interest in this

25  matter and your assistance to the industry.  And I wanted


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            42

 1  to make sure that all of you knew exactly where we were in

 2  the process and what we're trying to do.  And I appreciate

 3  the time, Madam Chairman.

 4           Thank you.

 5           CHAIRPERSON NICHOLS:  Well, thank you.

 6           All the Board members had expressed a lot of

 7  interest about this and making sure that it was

 8  implemented properly.  This is a big deal from an

 9  emissions perspective, and it's also something new that

10  we're doing with the SOON program.  So we welcome your

11  taking the time to come and bring us all up to date.

12  Thank you.

13           MR. LEWIS:  Thank you.

14           CHAIRPERSON NICHOLS:  Okay.  We're now going to

15  start the next item, which is on the mandatory reporting

16  of greenhouse gas emissions.  And this is going to be a

17  more extensive item than the previous ones because action

18  will be called for.

19           And I would like to begin the staff presentation.

20           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

21  Nichols.

22           Staff will present their recommendation for Board

23  adoption of a regulation for the mandatory reporting of

24  California greenhouse gas emissions.  AB 32 specifies the

25  Board is to adopt a mandatory GHG reporting regulation by


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            43

 1  January 1st 2008.

 2           The regulation was developed over the past year

 3  and could not have been completed without the outstanding

 4  and ongoing stakeholder involvement throughout the

 5  process.  And I'd like to also thank the staff for their

 6  tremendous effort over the past year.

 7           The reporting requirements were developed to meet

 8  the requirements of AB 32.  AB 32 specifies that the

 9  regulation must use rigorous and consistent emission

10  accounting methods, account for all electricity consumed

11  in the state including imports, require verification of

12  emissions data, and provide consistency with other

13  programs to the extent feasible.

14           The regulation provides a foundation for

15  improving our baseline emission estimates, which you'll

16  hear about in our next agenda item, tracking emission

17  changes, supporting upcoming regulatory activities, and in

18  the future assisting with potential market or trading

19  programs.

20           Adoption of the proposed regulation is only the

21  first step in the emissions reporting.  Implementation of

22  the regulation will require significant ongoing effort

23  from ARB staff.  Staff is committed to continuing our

24  positive working relationship with stakeholders to ensure

25  that the greenhouse gas reporting program is successful,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            44

 1  providing the technical support and training needed for a

 2  smooth transition to put these new requirements into

 3  practice.

 4           I would now like to introduce Ms. Rajinder

 5  Sahota, who will make the presentation to the Board on the

 6  proposed regulation.

 7           (Thereupon an overhead presentation was

 8           presented as follows.)

 9           AIR POLLUTION SPECIALIST SAHOTA:  Thank you, Mr.

10  Goldstene and good morning, Chairman Nichols and members

11  of the Board.

12           Today we are proposing for your consideration the

13  mandatory reporting regulation for greenhouse gases

14  pursuant to the California Global Warming Solutions Act of

15  2006, or AB 32.

16                            --o0o--

17           AIR POLLUTION SPECIALIST SAHOTA:  After briefing

18  describing the statutory requirements for mandatory

19  reporting, I will present the key components of the

20  mandatory reporting regulation, requirements for

21  third-party verification, the estimated cost to facilities

22  to comply with the regulation, and additional

23  modifications we are proposing to the draft regulation we

24  released on October 19th.

25           These modifications are based on input from a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            45

 1  broad range of stakeholders and also include some general

 2  cleanup of the originally proposed language.

 3           Lastly, we will present our recommendation to

 4  you.

 5                            --o0o--

 6           AIR POLLUTION SPECIALIST SAHOTA:  AB 32 requires

 7  ARB to develop a mandatory reporting regulation that

 8  includes the largest greenhouse gas emission sources;

 9  accounts for all electricity consumed in the state,

10  including imports and line losses; ensures rigorous and

11  consistent accounting of emissions; includes a

12  verification element.

13           We are also directed to incorporate the standards

14  and protocols developed by the California climate action

15  registry to the extent feasible and promote consistency

16  among other reporting programs.

17           We believe that the regulatory proposal before

18  you today meets these requirements.

19                            --o0o--

20           AIR POLLUTION SPECIALIST SAHOTA:  This timeline

21  provides an overview of the full scope of AB 32

22  requirements.  For this Board item, we are focusing on the

23  mandatory reporting regulation, shown in the highlighted

24  box on the slide.  Later today, you will be asked to

25  approve the 1990 emissions level and 2020 emissions limit.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            46

 1                            --o0o--

 2           AIR POLLUTION SPECIALIST SAHOTA:  Staff was

 3  guided by several key principles that are consistent with

 4  existing reporting programs:

 5           Completeness requires emissions from all

 6  significant greenhouse gas sources and activities to be

 7  reported;

 8           Consistency allows for meaningful comparison of

 9  emissions year to year and across similar facilities;

10           Transparency calls for methods and results to be

11  publicly available; and

12           Accuracy requires rigorous calculation methods.

13  The verification process helps to ensure that the

14  greenhouse gas emissions reports are accurate, precise,

15  and considerable.

16           The data gathered under this regulation will help

17  California improve our inventory of greenhouse gases,

18  monitor the results of emission reduction strategies, and

19  support our overall program and goals.

20                            --o0o--

21           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

22  describe to you the proposed mandatory reporting

23  regulation.

24                            --o0o--

25           AIR POLLUTION SPECIALIST SAHOTA:  As required by


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            47

 1  AB 32, we have focused mandatory reporting on those

 2  sources contributing the most to statewide greenhouse gas

 3  emissions inventory.

 4           We propose that all electric generating

 5  facilities one megawatt and larger and emitting at least

 6  2500 metric tons of carbon dioxide per year must report.

 7  Those facilities that generate power using nuclear,

 8  hydroelectric, solar, or wind energy are not suggest to

 9  reporting because they do not produce greenhouse gas

10  emissions.

11           Because emissions from imported power must be

12  accounted for, we have included reporting requirements for

13  electricity retail providers and marketers.

14           Cogeneration facilities which produce both heat

15  and electricity are also subject to reporting under the

16  proposed regulation if they meet the same thresholds of

17  other power plants.

18           Oil refineries, hydrogen plants, and cement

19  plants are other significant sources of greenhouse gas

20  emissions that are included in the staff proposal.

21           We also propose to include a category of large

22  combustion sources not in the industrial sectors that I

23  mentioned that emit 25,000 or more metric tons of carbon

24  dioxide per year from their stationary combustion sources,

25  such as large boilers or furnaces.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            48

 1           We estimate that about 800 facilities will be

 2  subject to the mandatory reporting requirements.  This

 3  will account for about 94 percent of the overall

 4  stationary carbon dioxide emissions produced within

 5  California.

 6                            --o0o--

 7           AIR POLLUTION SPECIALIST SAHOTA:  There are

 8  several key requirements in the regulation.  Everyone

 9  subject to the regulation would be required to submit

10  greenhouse gas emissions reports on an annual basis.

11           The company with operational control of the

12  facility that emits greenhouse gases will be required to

13  submit the report.  This is the company with the authority

14  to introduce and implement operating, environmental

15  health, and safety policies at the facility.

16           All Kyoto gases shall be reported where

17  specified.

18           Reporting in the electric power sector goes

19  beyond the facility level, to include purchases and sales

20  by retail providers and marketers.  And we are proposing

21  an independent third-party verification program to ensure

22  the quality and completeness of submitted data.  Staff has

23  proposed that verification be required on an annual basis

24  for the more complex sources and once every three years

25  for less complex sources.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            49

 1                            --o0o--

 2           AIR POLLUTION SPECIALIST SAHOTA:  Reporting

 3  facilities would account for combustion emissions,

 4  emissions from chemical and other processes, and fugitive

 5  emissions as specified in the regulation.

 6           Facilities outside the electricity sector would

 7  also report their usage of purchased electricity and

 8  thermal energy.

 9           The proposed regulation specifies how emissions

10  are to be calculated.  Depending on the type of facility

11  reporting, the regulation requires fuel sampling for

12  heating value or carbon content, the use of default

13  factors for emissions, the use of continuous emissions

14  monitoring systems, or mass balance approaches.

15           Though reporting of all specified sources is

16  required, we have included de minimis level with a cap

17  that facilities may apply to their smallest sources.  Such

18  emissions could be calculated using simplified methods.

19                            --o0o--

20           AIR POLLUTION SPECIALIST SAHOTA:  Facilities

21  would submit their first emissions reports in 2009, for

22  their 2008 emissions.  Staff is proposing a staggered

23  reporting schedule.  Facilities with more complex

24  reporting requirements are given additional time to submit

25  their data.  An online reporting tool will be made


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            50

 1  available by ARB for data submittals.

 2           Staff proposes a transitional start-up year for

 3  the 2008 emissions data.  For this year, facility

 4  operators may use the best available data instead of the

 5  specific calculation methods within the regulation if

 6  information is not available to comply with the specified

 7  requirements.  Data submitted during this first year would

 8  also not be subject to verification except at the option

 9  of the reporter.

10           Beginning with the 2009 emissions reported in

11  2010, data submittals must be in full compliance with the

12  requirements and methods specified in the regulation

13  including verification requirements.

14                            --o0o--

15           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

16  talk about the power sector reporting requirements.

17                            --o0o--

18           AIR POLLUTION SPECIALIST SAHOTA:  For the power

19  sector, the proposed regulation requires generators,

20  retail providers, and marketers to all report.

21           Specifically, we are requiring the power plant

22  operators for all facilities one megawatt or higher, that

23  also emit 2500 metric tons or more of carbon dioxide per

24  year, to report.

25           Secondly, we include retail providers who serve


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            51

 1  end-users of electricity, including investor-owned

 2  utilities and publicly-owned utilities.

 3           Third, marketers who purchase or sell power at

 4  the wholesale level but do not serve end-users must also

 5  report.

 6                            --o0o--

 7           AIR POLLUTION SPECIALIST SAHOTA:  Each of these

 8  groups has unique reporting requirements.  The reporters

 9  of electric generating facilities will report the direct

10  emissions from their facilities using methods adopted from

11  the California Climate Action Registry protocols.

12           The retail providers will be required to report

13  both direct emissions from the facilities they operate and

14  electricity purchase and sales data.

15           Marketers would principally report electricity

16  purchase and sales data.

17           Collection of electricity purchase and sales data

18  is necessary to calculate emissions from imported

19  electricity.

20                            --o0o--

21           AIR POLLUTION SPECIALIST SAHOTA:  Staff's

22  proposal is based on the California Public Utilities and

23  California Energy Commission's recommendations for the

24  collection of purchase and sales data for retail providers

25  and marketers.  These recommendations were adopted by both


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            52

 1  agencies in September of this year.  The joint

 2  recommendations reflected in our regulation would allow

 3  collection of data for all potential regulatory

 4  approaches.

 5           Once the regulatory program has been defined, we

 6  intend to revise the reporting regulation focus on the

 7  data needed to support the approach taken.

 8           Our reporting requirements, and the proposed

 9  methods and factors by which ARB will calculate emissions,

10  will continue to be refined through a public process

11  involving the California Public Utilities Commission,

12  California Energy Commission, and ARB.

13                            --o0o--

14           AIR POLLUTION SPECIALIST SAHOTA:  The proposed

15  reporting requirements for cogeneration facilities are

16  based on the California Climate Action Registry's

17  efficiency method.  The method requires operators to

18  calculate emissions from both electricity and thermal

19  energy.

20           As with other electricity-generating facilities,

21  facilities larger than one megawatt electricity-generating

22  capacity that emit at least 2500 metric tons of carbon

23  dioxide per year are required to report.

24           As will be discussed later, staff is proposing

25  some modifications today to simplify reporting for the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            53

 1  smallest cogeneration facilities.

 2                            --o0o--

 3           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

 4  describe the reporting requirements for refineries and

 5  hydrogen plants.

 6                            --o0o--

 7           AIR POLLUTION SPECIALIST SAHOTA:  Unlike the

 8  other sectors included in today's proposal, the climate

 9  action registry has not developed a reporting protocol for

10  oil refineries.  Staff developed the reporting

11  requirements for this regulation using a variety of

12  sources including the American Petroleum Institute, or API

13  Compendium; the Climate Action Registry Refinery Protocol

14  discussion paper; existing California air district rules

15  and methods; and U.S. EPA, IPPC, and European Union

16  guidance documents.

17                            --o0o--

18           AIR POLLUTION SPECIALIST SAHOTA:  Refineries will

19  have to report their combustion emissions.  We are

20  proposing an enhancement to the API methods to require

21  calculation of refinery-specific carbon dioxide emission

22  factors, rather than reliance on default values, because

23  refinery fuel gas is a highly variable source.

24           Refineries would also report process-related

25  emissions, from catalytic cracking and regeneration,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            54

 1  sulfur recovery and asphalt flowing.

 2           And refineries would report fugitive and flaring

 3  emissions using established methods.

 4                            --o0o--

 5           AIR POLLUTION SPECIALIST SAHOTA:  A number of

 6  issues arose during the regulatory development process for

 7  the petroleum refining sector.

 8           Stakeholders raised concerns about the frequency

 9  of measurement of the carbon content of refinery fuel gas.

10  We are proposing daily sampling to account for the

11  significant variability in this fuel.  Combustion of

12  refinery fuel gas accounts for about half of refinery

13  greenhouse gas emissions.  This approach is consistent

14  with the EU and IPCC.

15           For small refineries there is typically less

16  variability, and staff is proposing modifications to the

17  sampling frequency for these refineries.

18           Stakeholders also raised the issue of how to

19  account for emissions when required metering instruments

20  break down.  We agree on the need to address this issue

21  and propose to develop language for a 15-day package.

22                            --o0o--

23           AIR POLLUTION SPECIALIST SAHOTA:  Hydrogen

24  production is critical to the production of ultra-low

25  sulfur and low emission transportation fuels.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            55

 1           In some cases, hydrogen production plants are on

 2  site at a refinery complex.  In other cases, they are

 3  stand-alone facilities.

 4           Reporting requirements for the hydrogen plants

 5  are similar to requirements for refineries, and staff has

 6  again modified existing API methods to reflect variations

 7  in plant operations and fuels.

 8                            --o0o--

 9           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

10  discuss the cement plant reporting requirements.

11                            --o0o--

12           AIR POLLUTION SPECIALIST SAHOTA:  California's

13  eleven cement plants will calculate and report their

14  combustion process and fugitive emissions using methods

15  based on the California Climate Action Registry protocols.

16  Cement plants will report emissions using plant-specific

17  emission factors, and also calculate and report efficiency

18  metrics to specify how much carbon dioxide emissions are

19  generated per metric ton product.

20           We recognize that there are broad issues related

21  to the issue of imports and leakage that will need to be

22  addressed as the overall program develops.

23                            --o0o--

24           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

25  describe the general stationary combustion reporting


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            56

 1  requirements.

 2                            --o0o--

 3           AIR POLLUTION SPECIALIST SAHOTA:  We are

 4  proposing that any facility that emits greater than or

 5  equal to 25,000 metric tons of carbon dioxide with for

 6  stationary combustion report under this regulation.

 7           Reporting requirements for the general combustion

 8  facilities are less complex than for the preceding

 9  specific sectors and are typically based on fuel

10  consumption and the use of default emission factors.

11           Staff recognizes that some of the facilities in

12  this category may have process or fugitive emissions.  We

13  will consider adding additional reporting requirements in

14  future updates to this regulation.

15                            --o0o--

16           AIR POLLUTION SPECIALIST SAHOTA:  This next slide

17  shows some of the significant sectors that we brought in

18  with this threshold.

19                            --o0o--

20           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

21  describe the proposed verification requirements.

22                            --o0o--

23           AIR POLLUTION SPECIALIST SAHOTA:  AB 32

24  explicitly calls for the verification of greenhouse

25  emissions.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            57

 1           A strong verification component is important to

 2  the rigor and integrity of any greenhouse gas reporting

 3  program.  We are proposing a third-party verification

 4  program that is built on international standards.

 5  Third-party verification is consistent with the

 6  requirements of the California Climate Action Registry and

 7  European Union programs.

 8           Our proposal allows for both private consultants

 9  and California air district staff to provide verification

10  services which will give flexibility to the reporting

11  facility.

12                            --o0o--

13           AIR POLLUTION SPECIALIST SAHOTA:  ARB staff will

14  train and accredit verifiers beginning next year.  The

15  training will be multi-day with an exit examination, with

16  sessions focused on specific sectors such as retail

17  providers and petroleum refineries.  ARB is committed to

18  the training and accreditation of sufficient number of

19  verifiers before verification requirements begin in 2010.

20           ARB will be responsible for the accreditation of

21  verifiers and conducted targeted audits of submitted data.

22                            --o0o--

23           AIR POLLUTION SPECIALIST SAHOTA:  The proposed

24  regulation specifies the services that must be conducted

25  as part of verification of reported emissions.  Each of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            58

 1  the items discussed on this slide are internationally

 2  recognized components of verification.

 3           The required services include making a site visit

 4  to determine facility boundaries, developing a sampling

 5  plan for the larger sources, and conducting data checks.

 6  The verifier must attest to whether or not the total

 7  facility emissions reported would be within 5 percent of

 8  the true emissions at the site.  At the end of

 9  verification services, the verifier submits a verification

10  opinion to the facility and to ARB.

11                            --o0o--

12           AIR POLLUTION SPECIALIST SAHOTA:  Next, I will

13  provide an overview of the estimated costs to businesses

14  to comply with the proposed regulation.

15                            --o0o--

16           AIR POLLUTION SPECIALIST SAHOTA:  We expect about

17  800 sources to be affected by the regulation.  The vast

18  majority of these are private businesses.  But some public

19  agencies such as large municipal utility districts would

20  also be affected.

21           Based on cost survey data, we have estimated the

22  annual program implementation costs to be in the range of

23  21 to $30 million per year.  We anticipate that industry

24  costs will decrease over time as facilities establish the

25  systems and expertise to make greenhouse gas reporting a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            59

 1  part of their normal business practices.

 2           We could find no evidence to indicate that the

 3  proposal would lead to a loss in California jobs.

 4  Instead, we anticipate that there could be a small

 5  increase in jobs for technical consultants to act as

 6  verifiers.

 7                            --o0o--

 8           AIR POLLUTION SPECIALIST SAHOTA:  At this time,

 9  we are proposing some modifications to the draft

10  regulation that was released on October 19th.  Most of

11  these are to provide clarification or to address specific

12  issues raised in the public process.

13                            --o0o--

14           AIR POLLUTION SPECIALIST SAHOTA:  Staff proposes

15  to raise the de minimis cap from 10,000 to 20,000 metric

16  tons of CO2 equivalent.  We believe that the higher cap,

17  which is consistent with similar limits in the European

18  Union, will provide additional flexibility in the

19  calculation of reported emissions without a significant

20  impact on overall data quality.

21           As we mentioned earlier, we agree there needs to

22  be language to address reporting procedures during

23  instrument breakdowns.  And we will develop language to be

24  included in the 15-day package.

25           Staff is proposing several clarifications


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            60

 1  affecting how purchases and sales are reported by retail

 2  providers in the power sector.  These changes include

 3  clear designation of power sold within California as a

 4  California sale, and reduced limits on claims of power

 5  from nuclear and hydroelectric facilities.

 6           Staff is proposing to allow weekly versus daily

 7  sampling for refinery fuel gas composition at small

 8  refineries.  This would affect only the small refineries,

 9  accounting for 2.5 percent of state's crude oil processing

10  capacity.  These small refiners typically have a single

11  blended refinery fuel gas system, so variability is low.

12           Staff is proposing to simplify reporting

13  requirements for small cogeneration facilities by not

14  requiring them to report thermal energy production

15  separately.  These facilities often lack the steam

16  metering equipment needed to do that.

17           Finally, our revised proposal includes other

18  minor changes and clarifications including several new

19  definitions and general language cleanup.

20                            --o0o--

21           AIR POLLUTION SPECIALIST SAHOTA:  Staff

22  recommends that the Board approve the proposed regulation

23  and modifications as presented today.

24           This concludes the staff presentation, and we

25  would like to now answer any questions or concerns the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            61

 1  Board may have.

 2           CHAIRPERSON NICHOLS:  Thank you for the

 3  presentation.

 4           We will be holding a formal public hearing and

 5  asking for a vote on this at the end.

 6           This is the first actual regulation that this

 7  Board will be adopting pursuant to AB 32, although we've

 8  taken a number of other actions before now.  And it's a

 9  major step forward in implementation of the program.

10           I looked through the comment letters that were

11  provided to us, and there were a large number of technical

12  comments that related to how emissions were to be

13  calculated, how they were to be apportioned, et cetera.

14  And I guess my question would be just to ask the staff

15  whether you feel that you addressed most of those comments

16  in the final -- or in the proposal that you have brought

17  before us today?

18           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

19           Madam Chairman, this is Richard Bode.  And we've

20  actually done quite a few modifications that are before

21  you today that we brought in addition to our original

22  proposal.  We've looked at several of those comments too,

23  and we think there probably may be more as we move forward

24  with this 15-day package.  So we'd suggest -- we're going

25  to go through some of those comments and see if there's


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            62

 1  other clarifications we might make in that.  But I think

 2  we've actually done a pretty outstanding job in

 3  addressing.

 4           And, you're right, some very technical issues

 5  with the sectors.

 6           CHAIRPERSON NICHOLS:  Thank you.

 7           Other questions before we begin?

 8           Yes.

 9           BOARD MEMBER SPERLING:  So to follow up on that.

10  Can you tell us what is the process for revising and

11  making changes in this as we go along.  You know, there is

12  the concern that we're adopting this rule before we even

13  know what the policies are going to be.  And normally

14  you'd want to figure out what you're trying to achieve and

15  then figure it out.  And, you know, I understand why we're

16  doing this early.  But -- so can you reassure us about --

17  or tell us what the process will be for updating,

18  revising, and so on and how that will work?

19           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

20           Well, our plan is we'll take the modifications

21  that are approved here at this Board meeting.  There's

22  still some that are discussed in our presentation today

23  that we'll put into actual language in the regulation.  We

24  again have to put that out for a 15-day process of public

25  review.  And we'll get those into a final regulation, that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            63

 1  then has to be adopted -- or approved by the Office of

 2  Administrative Law.

 3           Our plan right now is to get the implementation

 4  of the reporting program up and started this next year.

 5  Quite a bit of work to do that.  And then we as the --

 6  actually the Act says is we expect to come back to this

 7  Board with modifications again as we respond to that

 8  implementation of the program and as the whole AB 32

 9  program changes.

10           BOARD MEMBER SPERLING:  So will there be a normal

11  annual update or -- I mean because it's not just this

12  immediate rule but it's into the long-term future as well.

13           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

14           We expect we'll probably be back within a year's

15  time, especially as we start the implementation and we

16  find new things out.  And especially as the first year of

17  reporting takes place, that we'll learn new things.  And

18  facility operators tell us ways the program should change.

19  I don't know if we want to do it every year.  But, you

20  know, I think a lot of that will depend on issues we find

21  out as the process moves forward.

22           DEPUTY EXECUTIVE OFFICER TERRY:  I was just going

23  to say, staff doesn't want to commit to every year.  But I

24  think realistically for the next few years it will likely

25  be every year because the program is going to be so active


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            64

 1  in the next few years.  And because this first year is a

 2  transitional year, we think we will learn a lot.  And the

 3  technical guidance that we plan to provide for our

 4  facilities early next year, so that first transition year

 5  can be as rigorous as possible, I think we'll learn a lot

 6  as we develop the technical guidance and we answer

 7  questions from facilities reporting.  So we will

 8  definitely be back with changes in the first year.

 9           BOARD MEMBER SPERLING:  And just one last

10  question.

11           And so can we be -- how can the companies be

12  certain that the rules are not going to change too much on

13  them as they go along?  How do you think about that?

14           DEPUTY EXECUTIVE OFFICER TERRY:  How do you

15  balance that?

16           (Laughter.)

17           CHAIRPERSON NICHOLS:  Enough flexibility but also

18  enough certainty, yes.

19           DEPUTY EXECUTIVE OFFICER TERRY:  Well, and I

20  think going back to the derivation of the calculations,

21  these are based, by and large, on international protocols,

22  CCAR protocols.  So the fundamental calculations are not

23  likely to change.  But what we're talking about is sort of

24  practical application in the real world and a lot of --

25  there will be new monitoring, meters and so on, actually


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            65

 1  physical changes made at facilities for tracking for some

 2  of the largest facilities.  And then we'll look at -- one

 3  of the things we did commit to was look at process

 4  emissions from the combustion sources and to make sure we

 5  haven't missed anything significant.

 6           So those are some obvious things we'll look at in

 7  the first year.

 8           CHAIRPERSON NICHOLS:  Yes, Ms. Riordan.

 9           BOARD MEMBER RIORDAN:  First of all, let me thank

10  the staff for one thing which I think is so important.

11  And, that is, that you developed some regulations here

12  that are very sympathetic to what had been before as a

13  voluntary reporting operation through the California

14  action registry.  And I think that's so important for us

15  to acknowledge what businesses have stepped forward under

16  a voluntary program and to try to make this as easy a

17  transition as possible.

18           And at the same time recognizing what Ms. Terry

19  just said.  The first year is going to be a real learning

20  experience for all of us, probably.  And we are going to

21  need to go back and make some adjustments, but recognizing

22  that we want to keep most things very consistent for our

23  businesses and our entities that are reporting.

24           But I just think, Madam Chairman, it's so

25  important that we make a real effort to help those who had


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            66

 1  been at the volunteer, cutting-edge, early-on, and that we

 2  make it as easy as possible for them to transition into

 3  this new program.

 4           CHAIRPERSON NICHOLS:  Thank you.

 5           Yes, Supervisor Hill.

 6           SUPERVISOR HILL:  Thank you, Madam Chair.

 7           I know there's been a lot of discussion going on

 8  of late over the reporting and the air district's role in

 9  that reporting.  And within the last couple of days

10  CAPCOA, it's my understanding, has changed their position

11  and have become neutral.  And they were certainly

12  supportive of the idea of reporting going through the

13  local air districts, and the air districts taking that

14  leadership role in this.

15           I know Mark Ross is here, the Chair of the Bay

16  Area District.  And yesterday at our Board meeting at the

17  Bay Area Air Quality Management District we had a very

18  heated passionate discussion over this issue.  And the

19  Board members feel very strongly that they are the closest

20  to the sources and that have the information available.

21  They're already working and reporting most of the

22  emissions coming from there.  And what I'd like to -- and

23  I know Mark will be speaking to this later.  But I would

24  like to just have for the record why the direction is

25  going the way it's going.  And if there are -- and I know


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            67

 1  there probably is many reasons to have the air district do

 2  it, as there are for from not to do this.  And I think

 3  there's a role for the air districts, and I think Mike and

 4  I were talking about it earlier, that they will have a

 5  role as we move forward.

 6           Personally, I feel that the direction we're going

 7  is appropriate.  But I think the air district board

 8  members throughout the state in many cases are not of that

 9  mind and have -- and I think it would be appropriate for

10  us to share with them the reasons why we're going in the

11  way we are and that the ARB staff and that ARB should be

12  taking that role.

13           CHAIRPERSON NICHOLS:  Thank you.  This is going

14  to be coming up in the comments on the proposal.  But I

15  think it might be useful to have staff address the issue

16  up front as to why this regulation has taken the shape

17  that it has.  I know there -- I myself participated in

18  some discussions also with some district board and staff

19  members about this issue.  And you're certainly right,

20  that it's generated a lot of passion.  And I think that

21  the resolution which is being proposed does give the

22  districts a significant role, at least those districts

23  that want to have a significant role.  But I think it

24  might be good to just explain the reasons why the staff is

25  taking the approach that they have.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            68

 1           Do you want to start, Ms. Terry?

 2           DEPUTY EXECUTIVE OFFICER TERRY:  Yes.

 3           We certainly at the staff level want to continue

 4  our good working relationship with district staff.  And we

 5  have had conversations about the value, as we move into

 6  inventorying greenhouse gas emissions, that we want to

 7  integrate that technical work with our criteria pollutant

 8  programs and toxics programs.  It makes ultimate sense

 9  and, in fact, will improve California's overall emissions

10  inventory.  So to that end we're working with the

11  districts to develop integrated reporting tools.  So we've

12  made that offer, and some of the largest districts

13  particularly interested in working with us.

14           So as we develop our online reporting tool, we're

15  working with your district, for example, in South Coast,

16  and others that are interested to have a reporting tool

17  that -- if they would like to develop one that is seamless

18  with ours so that a facility in the Bay Area, for example,

19  could report their district required emissions as well as

20  the statewide greenhouse gas emissions in a seamless

21  system, we think that's a wonderful thing to work on and

22  we're committed to do that.

23           The broader question of why reporting directly to

24  ARB, I mean at first blush AB 32 directed that a statewide

25  program be developed, that facilities would report their


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            69

 1  emissions to ARB, and that we would follow to the greatest

 2  extent possible the international paradigm of voluntary

 3  reporting, the CCAR protocols.  And so it seemed like

 4  one-stop shopping for the State of California was very

 5  consistent with the way this program is evolving

 6  internationally.

 7           That said, however, we do think there's a very

 8  valuable role for districts going forward with this

 9  program.

10           CHAIRPERSON NICHOLS:  Okay.  I think that's

11  pretty much the best that can be said, a lot of lower

12  level detail, but overall that was the philosophy.  So I

13  appreciate that response.

14           If it's acceptable, Ms. Kennard.

15           BOARD MEMBER KENNARD:  I had a question regarding

16  the economic analysis.  And it was very thorough in the

17  staff report.  And although you kind of indicated that

18  there's no significant material impact, it is still

19  significant number of dollars particularly in the first

20  years.  Costs are costs.  And I'm assuming that you

21  anticipate that either the private businesses are going to

22  absorb this cost or they are going to be incrementally

23  passed on to the consumer.  That's my first question.

24           CLIMATE CHANGE REPORTING SECTION MANAGER

25  THOMPSON:  I'm Doug Thompson, Manager of the Climate


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            70

 1  Change Reporting Section.

 2           We did an economic analysis where we attempted to

 3  look at some of the effects and how they might trickle

 4  down through the economy.  And our conclusion was that we

 5  didn't see adverse economic impact.  We thought there

 6  might be a slight increase in jobs, for example.

 7           I think that your original question was regarding

 8  what the -- could you restate your question?

 9           BOARD MEMBER KENNARD:  Sure.  Even though you've

10  said they're materially insignificant, the costs, but they

11  are costs nonetheless.  At some point somebody has to bear

12  those costs, either the businesses or the local

13  governments or the consumers.  So at some point this

14  economic analysis I would hope would have determined that

15  either the businesses are going to absorb it or it's

16  ultimately going to be passed down to consumer.

17           CLIMATE CHANGE REPORTING SECTION MANAGER

18  THOMPSON:  That's correct.

19           DEPUTY EXECUTIVE OFFICER TERRY:  That's right.

20  That's the nature of our Research Division economic staff.

21  And the construct for doing the analysis is to look at

22  whether the economic impacts are such to cause someone to

23  go out of business.  And what is sort of the impact by

24  sector by business.

25           And we actually have a number of backup slides if


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            71

 1  you're interested to go into more detail on the economics.

 2           BOARD MEMBER KENNARD:  I just want to be clear.

 3  Because this is a mandatory program.  Ultimately, the

 4  consumer is going to pay in some way, shape, or form.

 5           And the other question is relative to local

 6  government's ability to pay.  Many governments are so

 7  strapped.  Although again the numbers are seemingly de

 8  minimis, do you anticipate that they'll be some local

 9  governments that will have an inability to bear the burden

10  of the cost?

11           CLIMATE CHANGE REPORTING SECTION MANAGER

12  THOMPSON:  We don't anticipate a problem with that.  We

13  haven't heard concern about that at this point.

14           We do know that municipal utilities will have

15  some burden to bare here.  But we're not bringing in local

16  governments, per se, at this point.  There will be some

17  local impact from utilities, for example, and possibly on

18  solid waste or other facilities.

19           BOARD MEMBER KENNARD:  Thank you.

20           CHAIRPERSON NICHOLS:  Okay.  Let's now go to the

21  public hearing then, and we will be imposing a time limit.

22  I hope we have our timer here.  And we will be asking you

23  to keep your comments to three minutes or less.  And I'll

24  just call the witnesses in order.  And I'll try to give

25  you some notice of when you're next in line.  So we're


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            72

 1  beginning to begin with Devra Wang, followed by Mark

 2  Nordheim and then John Busterud.  Good morning.

 3           MS. WANG:  Good morning, Madam Chair and members

 4  of the Board.  My name is Devra Wang with the Natural

 5  Resources Defense Council.  I'm here in support of the

 6  proposed mandatory reporting regulations.

 7           We are urging you to adopt the reporting

 8  regulations with one important change.  Before I jump into

 9  that though, I'd very much like to commend CARB staff and

10  the staff at the sister agencies that did an excellent job

11  putting together these mandatory reporting regulations

12  through a very productive public process this year and

13  under very significant time constraints.  So we very much

14  appreciate all of your hard work this year.

15           As you know, these reporting rules are a critical

16  foundation for a successful implementation of AB 232.  As

17  the saying goes, you only manage what you measure.  And

18  this gets California starting to measure its greenhouse

19  gas emissions.  So we think this is very important

20  starting point for AB 32 implementation.

21           So let me explain the one change that we asked

22  you to make in the reporting regulations.  Currently, the

23  proposed rules would have all reporters submit best effort

24  reports in 2009 in order to allow time for the

25  verification infrastructure to be put into place.  The


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            73

 1  first verified reports would be submitted in 2010, but

 2  only for some of the reporters.  And so what this means is

 3  that the state wouldn't have a complete set of verified

 4  data until the end of 2011.

 5           So we are urging you to modify the rule to

 6  require that all of the reporters will be submitting

 7  verified reports in 2010.

 8           We think this is important, because without the

 9  change, CARB won't have a complete set of verified data

10  until the end of 2011, which is just months or perhaps

11  days before the enforcement of emission reduction programs

12  begins.  And this is a concern because one of the

13  principle lessons that I think we've all learned from

14  other emission reduction programs, including the European

15  Union's emission reduction program, is how important it is

16  to begin collecting fully verified emission data well in

17  advance of the start of the program.  So we would urge you

18  to ensure that CARB has a complete set of verified data by

19  2010.  And with that modification, we would strongly

20  support your adoption of these proposed rules.

21           Now, of course, the reporting regulations before

22  you today are an excellent start.  But they are only just

23  a start.  And as you discussed, over the next year, the

24  reporting program will need to be expanded to include

25  other significant sources that aren't included in the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            74

 1  rules today, such as natural gas utilities, landfills, and

 2  some other significant sources.

 3           So as the Board continues to refine the program,

 4  we urge you to continue to work with stakeholders to make

 5  sure that the reporting is as transparent as possible, to

 6  develop efficiency metrics wherever feasible, and to

 7  establish annual verification for emitters.

 8           So we look forward to continuing to work with you

 9  and urge you to adopt the rules.  Thank you.

10           CHAIRPERSON NICHOLS:  Thank you.

11           That piercing sound, for those in the audience

12  who couldn't see it, shows that the red light has come up.

13  And Ms. Wang did a great job of ending at three minutes.

14           Mark Nordheim, John Busterud, and Jerry Frost.

15           MR. NORDHEIM:  Good morning.  My name is Mark

16  Nordheim.  I'm the state regulatory team leader for the

17  Chevron Corporation.  And for the last eleven months, I've

18  also chaired our industry's working group working with

19  your staff on the regulation that's before you today.

20           I want to start out by -- I think you're going to

21  hear a lot of support for the fine work your staff has

22  done.  This has been a yeoman effort, zero to 60 in eleven

23  months.  This moves us roughly to UE Tier 2 maybe before

24  they get there.  So there are a lot of transition issues

25  that have been incorporated into this rule that will help


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            75

 1  us get there.

 2           I want to express my personal thanks to Richard,

 3  Doug, and Rajinda and the people who have worked in our

 4  sector for taking the time to come look at our facilities

 5  and help us learn along with them on how to do the best

 6  job.

 7           As you heard today, there's still work in

 8  progress.  We still have fugitives to go next year.  There

 9  are startup issues.  The guideline activity, the

10  development of verification training, all those things

11  become integrally important get this off the ground as

12  effectively and quickly as possible.

13           There are 138 pages of regulation, 57 equations,

14  five industry categories.  And to try to briefly answer

15  the Chairwoman's earlier question, through a speed read

16  yesterday with the exception of a little bit of

17  wordsmithing to ensure clarity, we're going to be in good

18  shape for the 15-day comment period.  Very specifically,

19  the work on break down stuff, we look very much forward to

20  working with the staff on that issue.

21           Just to click off a couple of other things.  The

22  issue of the districts, we think the staff approach brings

23  a nice balance to their way to handle that issue.  I know

24  there have been people on both sides of that equation.

25           And I want to close by reinforcing something that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            76

 1  Board Member D'Adamo brought up in the previous Board item

 2  related to local government.  And that's the issue of CEQA

 3  and the opportunity to bring some guidance, clarity,

 4  certainty not just for local government, for those of us

 5  who are going to have to be permitting, maybe important

 6  facilities to help reduce emissions so we get some

 7  clarity, consistency.  And the opportunity to do that I

 8  think is very ripe within the context of the scoping work

 9  that's going on right now.

10           So with that, I'll close and answer any questions

11  that you have.

12           CHAIRPERSON NICHOLS:  Thank you very much.  I

13  don't see any questions.  Thanks a lot.

14           John Busterud, and Jerry Frost and Tom Jordan.

15           MR. BUSTERUD:  Good morning, Chair Nichols and

16  Board.  I'm John Busterud, Director and Counsel of

17  Environmental Affairs for Pacific Gas and Electric

18  Company.

19           We're committed to making AB 32 a success.  And

20  we're one of the earliest supporter of this landmark

21  legislation.

22           I was also pleased to hear the recognition for

23  those who have stepped forward voluntarily to report, and

24  we were a charter member of the California Climate Action

25  Registry.  I'll be brief today.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            77

 1           We're pleased to speak in support of the proposed

 2  greenhouse gas reporting regulations.  Sound information

 3  on emission sources and levels is the bedrock upon which

 4  this Board can build a successful AB 32 program.  And it

 5  can also serve as model for emerging regional and national

 6  programs.

 7           I'd like to note in support of what staff said to

 8  Professor Sperling, there is -- the regulation is

 9  comprehensive, yet flexible.  And the way we read it at

10  least, for example, can accommodate various point of

11  regulations to dive right into detail on work that awaits

12  the Board.  But it does have flexibility built into it

13  without missing key sectors.

14           We want to commend staff for their outreach,

15  stakeholder engagement, and their very diligent efforts to

16  understand and work with the sectors and sources to which

17  the regulation will apply.  Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.

19           Jerry Frost.

20           MR. FROST:  Good morning, Madam Chair and members

21  of the Board.  My name is Jerry Frost.  I'm with Kern Oil

22  and Refining Company.  I'm here today to recognize and

23  commend the CARB's management and their staff for working

24  together with us and in particular listening to our issues

25  and suggestions and recommendations.  We very much


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            78

 1  appreciate that.

 2           They've made themselves accessible, even though

 3  we know they have a tremendous workload and a daunting

 4  task before them.

 5           We appreciate their recognition of the importance

 6  of designing a program that will work and will produce

 7  results.  We also appreciate their recognition that the

 8  program should ultimately reduce greenhouse gas emissions,

 9  yet stimulate, not stagnate, economic growth and

10  development within the state.

11           Kern has been involved in this regulatory process

12  from the beginning and is committed to continuing that

13  effort by working together with staff to cooperatively

14  develop a program that will be technologically feasible,

15  cost effective, will minimize leakage, will stimulate the

16  economy, and will ultimately yield tangible and measurable

17  results.  Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.  Very succinct

19  statement.

20           Tom Jordan followed by Julia May and Bruce

21  McLaughlin.

22           MR. JORDAN:  I'm Tom Jordan with the San Joaquin

23  Valley Air District.  I'm here today representing our

24  Executive Director and APCO of the district.

25           We support the mandatory reporting regulations


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            79

 1  that staff has proposed, and we definitely appreciate

 2  ARB's willingness to develop reporting system that allows

 3  facilities to report directly to both the air districts

 4  and ARB, much of the data we already collect through

 5  systems that we have.  So we think that's important.

 6           We think whatever systems developed should be

 7  non-duplicative.  And I think that that proposal to allow

 8  the dual reporting does that and is efficient as possible.

 9           All the air districts in the state have a lot of

10  experience in dealing particularly with the stationary

11  sources, and we've set up systems that allow the sources

12  to become familiar with and make it very easy for them to

13  get the data in.  So I think a lot can be gained by

14  working together of that area.

15           We also appreciate ARB's recognition that the air

16  districts have a lot of experience in dealing with these

17  sources and allowing districts if they so chose to become

18  certified as third-party verifiers.  We think that's an

19  important aspect of this.  And allows districts to work

20  with their regulated community.  And if it makes sense in

21  their areas to become verifiers and provide that service

22  to folks.

23           And as many of you may be aware, the San Joaquin

24  Valley Air District did join and partner with the State on

25  the lawsuit with the federal government over the waiver


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            80

 1  issue.  We think that those partnerships are important.

 2  And we'd like to keep partnering with you as we develop

 3  these regulations to make sure they're efficient and

 4  effective as possible and make sure we all meet our goals

 5  of reducing greenhouse gases.  Thank you.

 6           CHAIRPERSON NICHOLS:  Thank you.

 7           Julia May.

 8           MS. May:  I'm actually supposed to be on the

 9  opposing list.

10           CHAIRPERSON NICHOLS:  Yes.  That's all right.

11           MS. MAY:  I thought you were doing all the

12  support first.

13           CHAIRPERSON NICHOLS:  No.  We have many more

14  supporter.

15           MS. MAY:  We support if you changed certain

16  aspects of the regulation.  We want to thank the staff.

17  It's clear the staff has done a tremendous amount of work

18  under a very difficult regulatory deadline.  That's also

19  had a negative impact on public involvement unfortunately.

20           I'm with Communities for a Better Environment.

21  My colleague, Jesus Torres from Wilmington will speak

22  about aspects of this regulation.

23           We oppose the secret reporting that keeps the

24  data calculations housed in individual companies where the

25  public can't even look at it.  That is fundamentally


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            81

 1  opposed to environmental justice principles.  So we ask

 2  that the ARB require the companies put that data in-house

 3  Jesus will talk more about that.

 4           I also wanted to talk about hydrogen plants.  You

 5  noted they got piecemealed out, segregated from

 6  refineries.  The hydrogen plants are probably the fastest

 7  growing source of greenhouse gases in the state.  Because

 8  most of the refineries are switching to dirty crude oil

 9  that's high carbon and high sulfur, they need a lot more

10  hydrogen to strip the sulfur and to crack the

11  hydrocarbons, the heavy high carbon crude oil.  So they're

12  going the wrong way.  They're building an infrastructure

13  that's going to use a lot more hydrogen.

14           One example, in the Bay Area, one in a quarter

15  million metric tons of CO2 increase at one refinery mostly

16  from a hydrogen plant.  They're going to be separating out

17  the hydrogen plants from the oil refineries.  We oppose

18  this.  They should be included with the refineries.

19  Because even though the refineries are frequently farming

20  these out to other companies, most of the time they're on

21  refinery property.  They're contracted by the refineries.

22  They can even use fuels from the refineries.  And they're

23  making a product that goes back into the refineries.

24  They're not doing this as an alternative energy source.

25  And frequently are oversizing these sources.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            82

 1           CEQA really needs to be addressed in this issue

 2  in a way that looks holistically at the refinery.  We ask

 3  those plants be included with the refineries.

 4           We think the air district's role could be very

 5  helpful to address environmental justice principles in

 6  making the reporting to the air districts not just the

 7  data and emission results, but the actual calculations

 8  where local people who work on the local criteria and

 9  toxic emissions and are also very interested in climate

10  change and greenhouse gas can get the data more easily.

11           The public is very involved in scrutiny of these

12  large facilities.  And right now the data is going to be

13  housed secretly in each company.  ARB doesn't even

14  necessarily get the data unless you specially request it.

15  All you get is the emissions results.

16           Because of that, we think that's a fatal flaw in

17  the regulation and we oppose it.  If you would change to

18  bring that in house, that would make a major difference.

19           And again we thank the staff.  And we urge you

20  include hydrogen plants with the refineries, pull your

21  data calculations in house, or report them to the air

22  districts where the public can review them.  If you have

23  any questions.

24           CHAIRPERSON NICHOLS:  I was going to ask the

25  Board if they wouldn't mind if we can go through the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            83

 1  witnesses and then ask the staff to respond to these

 2  points as we go forward.  I think we're going to learn a

 3  lot from the comments.  Thank you.

 4           Bruce McLaughlin, followed by Jesus Torres and

 5  Tony Fischer.

 6           MR. MCLAUGHLIN:  Madam Chair and members of the

 7  Board, I'm Bruce McLaughlin representing the California

 8  Municipal Utilities Association.

 9           We participated in all the work shops, met with

10  staff many times, and filed comprehensive comments for the

11  record in this rulemaking.  Staff is both professional,

12  worthy of much respect, and I just flat out like them.

13           Nonetheless, I was disappointed with the certain

14  language in the original and revised staff proposals that

15  were articulated we think very clearly in our written

16  comments which we advised to your reading pleasure.

17           So today, I come equipped with a copy of AB 32

18  and two candy bars.  AB 32 is relevant, of course, because

19  it defines the height, breadth, and depth of authority

20  granted to this Board by the Legislature.  As scientists,

21  this Board no doubt recognize that the accuracy of any

22  experiment or test depends on the integrity of the system

23  being measured.  Therefore, a critical first step is to

24  define that system.

25           In terms of AB 32, the step is specifically


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            84

 1  defined by the gases to be measured and the geographical

 2  scope as expressly stated in the statute defining

 3  statewide greenhouse gas emissions, which are greenhouse

 4  gases emitted into the state of California or from

 5  electricity generated and then delivered to and consumed

 6  inside the state.

 7           That system then applies to all the reporting

 8  rules in the regs, the 2020 target, all rules establishing

 9  the emission reduction measures, all the optional

10  market-based compliance measures, the requirement that

11  reduction be real, and the enforcement procedures.

12           This position is not a rejection of any

13  obligation to reduce greenhouse gas emissions by the

14  publicly-owned electric utilities in state of California.

15  CMA welcome a robust and cross sector approach that's

16  regional or national in scope under the proper

17  jurisdictional authorities.

18           Now, why are these relevant?  Well, as we all

19  know all, Almond Joy has nuts, but Mounds don't.  And CARB

20  is able to regulate the chocolate, but they cannot

21  regulate the nuts.  And that's defined by the Legislature.

22           And so CMA requests that you read our comments

23  defining the limits of the scope of AB 32 and leave out

24  the nuts.  Thank you.

25           CHAIRPERSON NICHOLS:  Okay.  Thank you.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            85

 1           Mr. Torres, followed by Mr. Fischer and Barry

 2  Wallerstein.

 3           MR. TORRES:  Good morning, members of the Board.

 4  My name is Jesus Torres.  I'm a community member of the

 5  city of Wilmington and also an organizer with Communities

 6  for a Better Environment.  My community and many others in

 7  California face heavy burdens from refineries, oil

 8  drilling, ports, and power plants, which put out large

 9  emissions of greenhouse gases.  At the same time, they are

10  emitting smog-forming chemicals and toxics.

11           Low-income communities of color will likely be

12  impacted worse by climate change includes hotter days that

13  causes more smog and especially hurts people with asthma.

14  Heat waves that hurt the elderly and low-income people the

15  most and many other impacts we will feel right here due to

16  climate change.

17           As a result, we need good information and

18  reporting on greenhouse gases.  And we need open access to

19  this information, which is a fundamental requirement of

20  environmental justice.  Unfortunately, right now your

21  draft regulation allows the calculations for the reporting

22  to be held secretly at company headquarters where the

23  public cannot review it.

24           ARB will only receive the results of the

25  calculations.  Adopting this new method for CEQA reporting


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            86

 1  is a bad idea that moves away from public access to data

 2  and away from environmental justice.

 3           Companies already have strong protections for

 4  information that is legitimately trade secret, but this

 5  mandatory reporting regulation before you today is

 6  providing an added layer of secrecy by keeping the

 7  calculations for reporting housed as industrial

 8  headquarters instead of housing at the ARB.

 9           CBE strongly opposes this idea that goes against

10  the normal government practices for collecting data,

11  reviewing the data, and providing the public access to the

12  data as part of the good practices for public scrutiny.

13  Please direct your staff to require the calculations

14  forming the basis of the data to be submitted to ARB and

15  air districts so that the public may go through the normal

16  public records process to review the data.

17           Thank you for your consideration.  And we look

18  forward to continue working with you on these issues.

19  Thank you.

20           CHAIRPERSON NICHOLS:  Thank you very much.

21           Tony Fischer.

22           MR. FISCHER:  Thank you, Madam Chair and Board

23  members.  My name is Tony Fischer representing Nummi.  As

24  many of you know, Nummmi is the GM/Toyota venture in

25  Fremont that employs over 5,000 team members and produces


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            87

 1  approximately 400,000 vehicles per year.

 2           Nummi has attracted two California 23 affiliated

 3  major part supplying company and employ a total of 4,000

 4  additional team members.

 5           Nummi sees environmental stewardship as a very

 6  high priority and is taking a strong interest in finding

 7  workable solutions leading to the reduction of greenhouse

 8  gases.

 9           We recommend that any emission reporting be very

10  carefully tailored to assure need and consistency in

11  gathering information and guaranteeing accurate counts.

12  We appreciate staff proposal to exempt backup or emergency

13  generators and portable equipment from the mandatory

14  reporting requirements.  The fuel usages and emissions

15  associated with these equipments can be counted and

16  determined from upstream fuel reporting.  However, we are

17  concerned that staff continues to propose to require

18  mandatory reporting from energy end users and other

19  combustible sources whose emissions can be determined from

20  generators or upstream fuel reporting.

21           AB 32 does not require reporting from individual

22  entities except for retail sellers of electricity, unless

23  there is a need from such entities in determining the

24  statewide greenhouse gases.

25           Mandatory reporting of indirect energy usage by


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            88

 1  end users, especially electricity, is an unnecessary and

 2  duplicative reporting requirement proposed by staff.  This

 3  is so because end users would be reporting energy usage

 4  that has already been accounted for by the generators.

 5           Staff has argued that the principle consideration

 6  of indirect energy usage provides more complete picture of

 7  emission footprint of facilities.  This may provide more

 8  information about a facility, but as discussed above, such

 9  reporting should not be mandated because AB 32 only

10  requires reporting necessary to determine statewide

11  greenhouse gas emissions.

12           Similarly, natural gas users who generate

13  greenhouse gas emissions through combustion should not

14  report emissions, if the methodology used to determine the

15  statewide greenhouse gas emission in 1990 was based on

16  upstream natural gas fuel usage.  It would be much less

17  complicated for the state to gather distribution figures

18  from the limited number of upstream fueled distributors,

19  i.e., natural gas pipeline companies, than to inventory

20  the usage of many downstream combustion sources.

21           In summary, in order to track the state's

22  progress in achieving its emission goals, mandatory

23  reporting is only needed from those fuel sources emitted

24  that were used to determine the 1990 statewide greenhouse

25  gas emission levels.  In fact, this methodology is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            89

 1  necessary to ensure consistency and determining future

 2  yearly emissions.  This type of reporting system will be

 3  simpler for the state to administer.  It would also ensure

 4  more accurate account by eliminating the possibility of

 5  energy uses.

 6           In summary, for the above reasons, Nummi

 7  respectfully requests that CARB exempt from duplicative

 8  mandatory reporting those facilities whose emissions due

 9  to indirect electricity, end use, or natural gas usage

10  would properly be counted for by generators of upstream

11  fuel sources.  Thank you.

12           CHAIRPERSON NICHOLS:  Thank you.

13           Barry Wallerstein, followed by Mark Ross and Doug

14  Quetin.

15           MR. WALLERSTEIN:  Good morning, Chairman Nichols,

16  members of the Board.  I'm Barry Wallerstein, the

17  Executive Officer of the South Coast AQMD.

18           I'm not sure about the candy bar, but what I

19  think you're really doing today is establishing the GPS

20  system for AB 32 implementation.  Next item will be your

21  origin point, and the mandatory reporting will give you

22  year by year position towards your goal of 2020 and 2050.

23           I'm pleased to share with the Board that our

24  Board recognizes the importance of mandatory reporting,

25  has authorized our staff to already begin modifying our


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            90

 1  existing reporting tools so that we may incorporate all

 2  the data required in your draft regulation or the final

 3  regulation and to have simultaneous reporting to our two

 4  agencies.

 5           This new tool will be available for beta testing

 6  by March 1st and for full implementation by July 1st of

 7  2008.  Of course, by having the tools such as that, we

 8  will be able to increase efficiency and decrease costs for

 9  our facilities.

10           Turning to the other major component of the

11  program, which is the verification aspect, we do plan to

12  send our staff to CARB training to get certified as

13  verifiers.  And I am in discussions with the governing

14  board about offering verification services.

15           We do have, however, one important request of you

16  today regarding the verification.  And that is that you

17  ask the staff when they come back next year with another

18  look at this rule that they provide you with an auditing

19  plan.  We think that that is very important because our

20  past experience in our traditional program with a third

21  party verification is that it has been really a mixed bag.

22  In fact, a number of years ago, we ultimately had a

23  settlement over $100 million which was due in large part

24  to falsified data, in our view, submitted by a third party

25  verifier.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            91

 1           So while we recognize you are following the

 2  international model, we think that the auditing that was

 3  noted on your staff's slide number 28 is critical.  And it

 4  deserves some Board review in the way of an audit plan

 5  which would also be a further deterrent to anyone that has

 6  a notion that we're not looking for accurate data.

 7           And we also think that this element will have to

 8  be re-visited should you adopt the cap and trade program,

 9  because verification will then be critical to investments

10  of millions or hundreds of millions of dollars.

11           Lastly, I wanted to note that your new Executive

12  Officer, Mr. Goldstene, met with CAPCOA earlier this week.

13  You'll hear more about that from the CAPCOA.  But I wanted

14  you to know from my viewpoint that the meeting went very

15  well.  Mr. Goldstene was very open and extended clearly a

16  hand of partnership to the air district and we're very

17  appreciative of that.

18           CHAIRPERSON NICHOLS:   So he passed the first

19  test.  They gave him a name plate for the first time

20  today.  Good work.

21           Mark Ross, Doug Quetin, Eric Little.

22           MR. ROSS:  Thank you, Chairman Nichols, members

23  of the Board.  And life is like a box of chocolates.  You

24  don't know what you're going to find.  And the European

25  Union found out they didn't have quite the inventory they


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            92

 1  thought they had because of some frothing and some trouble

 2  in their market.

 3           Well, we at the Bay Area Air Quality management

 4  District, my Board of Directors and our staff, feel very

 5  strongly about a good inventory and helping the state

 6  develop and make AB 32 a success.  And so in that spirit

 7  of cooperation, I am here to extend our greetings that we

 8  would really encourage you to and in fact urge you in the

 9  spirit of partnership to include local air districts in

10  the inventory and reporting of greenhouse gas emissions.

11           We have extensive experience over the decades as

12  do the other air districts in collating the data for other

13  pollutants.  We feel we are right there pre-disposed to do

14  this job well.  We don't have any qualms about it.  We

15  have the people in place.  I have the utmost confidence in

16  our staff.  I can't speak for the other districts.  But I

17  think we have one of the best staffs in the country, if

18  not the world.

19           So I would like to urge the Board to consider

20  amend the regulation to include local air districts in the

21  inventory.  As Barry Wallerstein had said, the South Coast

22  is going to expand their duties to include carbon

23  inventorying in their scope.  And we at the Bay Area Air

24  Quality District will be intending on doing the same.  Not

25  as quickly as them, but we will be doing the same with the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            93

 1  hope it will help CARB and the success of AB 32 in the

 2  future.

 3           Now, the partnership aspect, as noted in the

 4  earlier agenda item, is something very near and dear to

 5  us.  We've had a good relationship with CARB in the last

 6  year.  You've helped us with our auditing.  You've helped

 7  us with a few other items in the last 48 hours, and we

 8  really are appreciative of that.  So we're looking forward

 9  to working with CARB.  Hoping we can collaborate with you

10  in a meaningful way.

11           Mr. Hill expressed the heated debate portion that

12  we had yesterday over the this resolution.  Not that we

13  don't disagree with CARB's generation direction in this.

14  But we really think that we have a passionate view in the

15  Bay Area of we want to help with the Global Warming

16  Solutions Act.  In fact, we were honored that the Governor

17  chose to Bay Area to sign the Act in the Bay Area.  We're

18  here in the spirit of cooperation.

19           We put in a neutral card, but it's neutral with a

20  nudge.  Didn't feel an opposition card was the feeling of

21  the Board.  We are here in the spirit of cooperation.

22  Thank you very much for your time.  If there are any

23  questions --

24           CHAIRPERSON NICHOLS:  Doug Quetin, Eric Little,

25  Chuck White.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            94

 1           MR. QUETIN:  Thank you, Madam Chair, members of

 2  the Board.  Doug Quetin, President of the California Air

 3  Pollution Control Officers Association.

 4           CAPCOA appreciate the opportunity to comment on

 5  this mandatory reporting regulation and recognizes the

 6  significance of this agenda item as well as the one that

 7  follows setting the greenhouse gas 1990 baseline and the

 8  2020 emission limits.

 9           We acknowledge and applaud your Board and staff

10  for your work on the difficult task at hand and the tasks

11  ahead to reduces and reverse global warming.

12           This is an historical and heroic effort.  Over

13  the past several months, local districts have consistently

14  expressed concern about the proposed mandatory reporting

15  regulation.  Generally, we believe this program could be

16  more efficient, the data more accurate, and the program

17  more viable were local air districts to serve directly as

18  the intermediary in collecting and reporting data on the

19  designated stationary sources.

20           We've been operating permitting and enforcement

21  programs and pollutant data reporting systems for the past

22  three decades.  Local permitting and enforcement ensure

23  the integrity of the reported pollutant data through the

24  continual district vigilance over stationary sources,

25  including the sources targeted by the regulation you are


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            95

 1  considering today.

 2           That being said, earlier this week, the CAPCOA

 3  Board of Directors hosted a retreat with Executive Officer

 4  Goldstene and his senior staff to discuss our role in

 5  ARB's implementation of AB 32, among other issues.

 6           Your staff openly reviewed in considerable detail

 7  all of the climate change work underway and that expected

 8  in the near future.  The meeting was especially productive

 9  because of the collegial tone James set and his

10  professionalism and general interest and collaborative

11  effort and mutual support.  We are very much pleased with

12  his invitation to better define a partnership between ARB

13  and CAPCOA on AB 32 implementation.  We are confident that

14  our knowledge and experience will provide added value to

15  your future efforts to reverse global warming through

16  emission reductions and by setting a model for the nation

17  and internationally.  Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.  Apologize for

19  butchering your name.

20           Eric Little, followed by Chuck White and Ann

21  McQueen.

22           MR. LITTLE:  Good morning, Madam Chair, members

23  of the Board.

24           I think you'll notice the written comments we

25  submitted today both have two topics involved in them.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            96

 1  One is this topic.  One is the next agenda item.  In order

 2  to keep us focused here today, I think I will come back on

 3  the second agenda item and simply address the topics at

 4  hand right now.

 5           I'd like to thank the staff for the efforts that

 6  they've made in the development of the proposal for

 7  mandatory reporting protocols and the recognition of some

 8  of our concerns.

 9           I was also glad to hear Dr. Sperling this morning

10  discuss the possibility of making some additional changes,

11  because there are some elements in this plan that we

12  believe still need further modification.

13           For example, the recognition that exchange

14  agreements between utilities have a different GHG profile

15  than a simple export of power.

16           Additionally, we do recognize as the presentation

17  pointed out there is a requirement to account for

18  transmission system losses.  However, it does not state

19  that it needs to be a one-size-fits-all, such as the seven

20  and a half percent lose factor applied to all imports from

21  the pacific northwest and desert southwest as currently

22  proposed.

23           Furthermore, the staff acknowledges there was not

24  a determination at the point of regulation made yet for

25  the electricity sector.  To compensate for this, the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            97

 1  current the current proposal requires the reporting of

 2  emission information for various alternative approaches.

 3  While Edison understands the needs for this based upon the

 4  current conditions, we also recognize that continue to do

 5  so after a point of regulation has been determined could

 6  result in duplicate or triplicate reporting.  For example,

 7  as you saw in the presentation, the reporting is required

 8  from generation, from a marketer, as well as from a retail

 9  provider.  While frequently one megawatt of energy that is

10  marketed is sold to a marketer who further sells to a

11  retail provider, in which case the GHG emission with that

12  one megawatt would be reported three times.

13           Therefore, once a point of regulation has been

14  determined, we believe this should be reconsidered and the

15  duplicative reporting should be eliminated.  Therefore, we

16  recommend that Board direct staff to revisit its proposal

17  with the intent of eliminating any unnecessary reporting

18  requirements.  This would adhere to the intent of AB 32's

19  directive to minimize administrative burden.

20           Thank you very much.

21           CHAIRPERSON NICHOLS:  Thank you.  Thank you for

22  double siding your comments, too.

23           Okay.  Chuck White, Ann McQueen and Gregory

24  Klatt.

25           MR. WHITE:  Chuck White.  Thank you, Madam Chair,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            98

 1  members of the Board.  Chuck White representing Waste

 2  Management.

 3           Waste Management was an early supporter of AB 32.

 4  We were the first solid waste company to join the

 5  California Climate Action Registry.  We're working with

 6  the solid waste industry group called Solid Waste Industry

 7  for Climate Solutions.

 8           We've gotten to know your staff very well over

 9  the last few months and really had a good working

10  relationship.  And I think most of our concerns have been

11  addressed.

12           There are two areas though that we do have

13  continuing concerns.  We're not asking you to necessarily

14  change this rule making, but I'm glad to hear you will be

15  revisiting these rules in the future.

16           One of the area of both reporting to CCAR and to

17  the Air Resources Board.  AB 32 encourages the Board to

18  rely on CCAR procedures.  You've tried to make them as

19  similar as possible, but that still requires two separate

20  reports and possibly other reports to the air districts.

21  Other states like New Mexico and Nevada are developing

22  reporting relying on CCAR or the forming of the Climate

23  Registry.

24           I would urge you to in the future when you come

25  back and look at this, is there a way that California's


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                            99

 1  reporting requirement can be made as consistent as

 2  possible with the reporting of these other regional and

 3  national reporting organizations.

 4           One of our other concerns has to do with biogenic

 5  emissions.  Biogenic versus anthropogenic.  Unfortunately,

 6  these regulations don't distinguish between biogenic and

 7  anthropogenic greenhouse gas emissions.  The anthropogenic

 8  emissions are basically fossil fuel emissions.  Whereas

 9  biogenic emission are from the near-term natural carbon

10  cycle.  Examples are landfill gas combustion emissions,

11  biogas combustion emissions, biomass and waste to energy,

12  both which be totally biomass or partially biomass,

13  partially fossil fuel, such as plastics and waste.

14           We would like to see that the reporting protocols

15  allow reporters to distinguish their greenhouse gas

16  emission between anthropogenic, fossil fuel, and biogenic

17  near-term carbon cycle emissions.  We think you are after

18  the fossil fuel emissions.  And in fact to treat them the

19  same runs counter to the Governor's Bioenergy Action Plan,

20  runs counter to the low carbon fuel standards.  In the

21  case of the low carbon fuel standard, you're still burning

22  carbon, but good carbon versus bad carbon.  It's carbon

23  that comes from ethanol or other types of maybe landfill

24  gas or biogas to displace carbon combustion sources.

25           So what we're asking is as you move forward to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           100

 1  adopt these rules.  And in the future to come back, see

 2  how well you can integrate this reporting with other

 3  regional reporting like the climate registries, and ask

 4  the staff to take a look at differentiating in the

 5  reporting framework between anthropogenic emissions of

 6  greenhouse gases and biogenic.  We think you want to

 7  reduce your anthropogenic and want to encourage those

 8  types of energy sources that rely on biogenic sources.

 9           Right now, they're all mixed together in your

10  reporting framework, all treated one and the same.  We

11  don't think that makes sense.  We don't think the state of

12  California thinks it makes sense based on the low carbon

13  fuel standard and the Bioenergy Action Plan.  When you

14  revisit this rule in a year, I hope you will address that

15  issue.  Thank you.

16           CHAIRPERSON NICHOLS:  Thank you.

17           Ann McQueen followed by Gregory Klatt and Don

18  Anair.

19           MS. MCQUEEN:  Hello.  My name is Ann McQueen, and

20  I'm here representing Mitsubishi Cement and National

21  Cement.  And I appreciate the opportunity to address the

22  Board.

23           Both of these companies manufacture cement in

24  California.  The cement industry has participated actively

25  in regulatory development thus far, including the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           101

 1  mandatory reporting and emission inventory.  At this time,

 2  we would like to reiterate some comments previously made

 3  because we think these comments are very important and

 4  have not yet been addressed.

 5           First regarding the scope of the mandatory

 6  reporting regulations, we believe that the failure to

 7  include the transportation sector, which is the largest

 8  single sector contribution to greenhouse gas emissions, in

 9  the mandatory reporting regulations will cause a problem

10  when preparing the scoping plan for achieving required

11  reductions.

12           For sectors not subject to mandatory reporting,

13  it will be much more difficult to regulate these sectors.

14  In general, the current mandatory reporting approach will

15  limit the opportunities for reduction measures, aggravate

16  the burden on industrial sources, and ultimately increase

17  the overall costs and corresponding job loss.

18           Second, we believe that the remaining uncertainty

19  in the 1990 emission inventory are significant.  For

20  example -- these do not relate specifically to cement, by

21  the way.  For example, given that some sectors are still

22  undergoing protocol development, this implies there will

23  be an inherent discrepancy between the 1990 inventory and

24  the reporting for the sectors once reporting is initiated.

25  To address these known discrepancies as well as other


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           102

 1  uncertainties, we recommend that ARB include provisions

 2  for scheduled period review and adjustment of the 1990

 3  inventory as new information becomes available.

 4           Third, although the development of the 2020

 5  projections is at an early stage, it is essential that ARB

 6  seek input from all sectors, because the variation in

 7  growth rates between sectors and the potential for causing

 8  leakage.  Specifically, we are concerned that growth

 9  projections could in effect become production limits for

10  domestic industry which could eventually result in

11  shifting of greenhouse gas emissions out of state to other

12  jurisdictions that likely have less stringent greenhouse

13  gas standards, if any.

14           Thank you very much for the opportunity to

15  present these comments.

16           CHAIRPERSON NICHOLS:  Thank you.

17           And just for planning purposes, we're going to

18  take an 11:30 break for about ten minutes.  And then we're

19  going to take a 1:00 lunch break or close there to.  Just

20  so people can plan their time accordingly.

21           Gregory Klatt, Don Anair.

22           MR. KLATT:  Thank you, Madam Chair, members of

23  the Board.  I'm here today on behalf of the Alliance for

24  Retail Energy Markets.

25           Now this is the first time that we've appeared


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           103

 1  before the Board.  Just want to give a brief introduction.

 2  If acronym is AREM.  Produced arm like your arm.  And the

 3  members of AREM are electric service providers that

 4  provide electricity to many of the businesses that will be

 5  affected by the reporting regulations and will themselves

 6  as retail providers in the electricity sector being

 7  affected by the regulation in terms of mandatory

 8  reporting.

 9           We still have to decide the point of regulation

10  issue, and that will go to how much further they will be

11  effected directly by the regulations adopted pursuant to

12  AB 32.

13           AREM was involved in the process before the

14  Public Utilities Commission and the Energy Commission put

15  together the proposed regulations and would look to

16  commend staff of both those organizations and staff of

17  this agency for the remarkable job they've done in putting

18  this together in a very short amount of time, going

19  through a lot of very technical issues, and just doing an

20  exceptional job.

21           I think the gentleman from Chevron used all the

22  good adjectives, so I'll leave it at that and say thank

23  you for a job well done.

24           We still have -- AREM generally supports the

25  proposed regulations.  We have one fairly technical issue


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           104

 1  that we would like staff to address that has to do with

 2  the attribution of default emissions to new contracts with

 3  existing resources.  We believe that that requirement is

 4  really intended to get at contract shuffling with large

 5  hydro -- potential for contract shuffling in terms of

 6  contracting with large hydro and nuclear facilities.

 7           And our concern is that it will interfere with

 8  compliance with the State's resource adequacy requirements

 9  by smaller retail providers such as the electric service

10  providers and our members of AREM.  And we would suggest

11  that this requirement or the default emission attribution

12  not include new contracts with existing resources that are

13  entered into for purposes of meeting resource adequacy

14  requirements.  And we go into that in more detail in our

15  comments.

16           The second issue that we have some concern about

17  is confidentiality.  We appreciate the reference in the

18  regulations to confidentiality.  And there's a process

19  there for reporting entities to request confidentiality.

20  We think that basically covers it.

21           We would suggest there be a more specific

22  reference to the trade secret provision of the Public

23  Records Act in the regulations.  And we would also request

24  that -- and this may be an issue that would be addressed

25  once actually reporting is done.  But we would suggest


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           105

 1  that some of the information that is reporting is very

 2  sensitive, and we request that type of information be made

 3  public on an aggregated basis only.  Thank you.

 4           CHAIRPERSON NICHOLS:  Thank you.

 5           I'm thinking that we need a system to either

 6  deduct all time spent complimenting the ARB staff for

 7  their good work or just kind of do a ditto.  What do you

 8  think?

 9           BOARD MEMBER SPERLING:  Maybe we can have a

10  credit trading system.

11           CHAIRPERSON NICHOLS:  A credit trading system for

12  how long and extensive the comments can be.

13           EXECUTIVE OFFICER GOLDSTENE:  We do like hearing

14  it.

15           CHAIRPERSON NICHOLS:  We know.  That's why we let

16  it go on.

17           MR. ANAIR:  Good morning, Madam Chair AND members

18  of the Board.  My name is Don Anair.  I'm with the Union

19  of Concerned Scientists.  And let me just start off by

20  thanking staff for what a wonderful job they did with this

21  regulation.

22           So now my timer starts.

23           I just want to make some brief comments.  We

24  support the mandatory reporting requirements that are

25  before you today.  Believe the accurate reporting of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           106

 1  climate change emissions is really the foundation of AB 32

 2  and successful implementation and achieving our climate

 3  change goals.

 4           The one request I have, and reiterating the

 5  request that Ms. Wang made earlier, is to move forward the

 6  full compliance date with verification by 2010.  We

 7  believe this is necessary to have that data prior to the

 8  2012 date of implementing the regulations and enforcing

 9  the regulations.  We think that's a necessary requirement.

10  We also believe that it's doable.  It will provide one to

11  two years to build the infrastructure reporting and

12  verification and provide the data that we need.

13           There's other comments we made in our written --

14  we submitted in our written comments.  I won't go into

15  those now.  I think those can be addressed as we move

16  forward and further develop the reporting requirements

17  over the next months and years to come.  Thank you very

18  much.

19           CHAIRPERSON NICHOLS:  Thank you.

20           Tim O'Connor followed by Derek Markolf and Taylor

21  Miller.

22           MR. O'CONNOR:  Good morning, Madam Chair, members

23  of the Board.  My name is Tim O'Connor.  I'm here

24  representing Environmental Defense.

25           First, I would also like to say thank you to the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           107

 1  CARB staff.  We've been active throughout this process

 2  participating in the work groups and appreciate the

 3  complexity and the thoroughness of the mandatory reporting

 4  regulation and think it is a great step towards meeting

 5  the AB 32 goals of reducing California's greenhouse gas

 6  emissions.

 7           I'd like to touch on a couple of topics where we

 8  feel the mandatory reporting regulation could go a little

 9  bit further.

10           First, I'd like to echo some of the comments that

11  full compliance should indeed be moved forward and that

12  there is really at this point no reason to delay the full

13  verification activities that are necessary in order to

14  make sure that the emissions reporting is accurate.

15           CARB intends to certify approximately 150

16  verifiers per year by increasing the number of facilities

17  that will be required to have their emissions verified.

18  There would be approximately 300 more facilities.  That is

19  about one verification per verifier.  We feel this is

20  completely doable in the 2010 timeline.

21           Second, we would like to see in the next year the

22  expansion of the mandatory reporting regulation to a

23  number of areas where the staff has agreed and commented

24  that it would indeed go.  We would like to see

25  consideration of lowering the mandatory reporting


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           108

 1  threshold to 10,000 metric tons.  Also like to see

 2  inclusion of landfills in terms of their fugitive

 3  emission, natural gas providers, oil and gas extraction

 4  facilities in terms of their fugitive emission, as well as

 5  the transportation sector, at least included in the

 6  mandatory reporting regulation staff report or in some

 7  consideration documents.

 8           Finally, in assessment of the staff's proposal to

 9  increase the de minimis reporting threshold to 20,000

10  metric tons, we'd like to see some assessment of what

11  that's going to include.  We don't know yet in terms of

12  like what streams would be following underneath the de

13  minimis reporting threshold.  And in order to accurately

14  and have an educated comment letter on the expansion of

15  that to a higher threshold, we'd like to see maybe just an

16  assessment of what the expected streams are.  If indeed

17  all the refinery waste water emissions fall underneath

18  this, there may not be a need for a waste water fugitive

19  emissions reporting scheme within the mandatory reporting

20  regulation.

21           And in conclusion, thank you very much.  And we

22  strongly support the adoption of the mandatory reporting

23  regulation by the Board.  Thank you.

24           CHAIRPERSON NICHOLS:  Thank you.

25           Derek Markolf, Taylor Miller, Darrell Clarke.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           109

 1           MR. MARKOLF:  Hello, Madam Chair and Board.

 2  Thank you.  My name is Derek Markolf with the California

 3  Climate Action Registry.  And we are here in support of

 4  the mandatory reporting regs that are before you.

 5           First of all, I'd like to strongly commend that

 6  staff of ARB and the sister agencies on the development of

 7  these regulations.  I guess those could be allocation for

 8  trading comments later.

 9           So the California Climate Action Registry was

10  formed by legislation at the State level in 2000 as a

11  nonprofit public/private partnership to develop greenhouse

12  gas accounting standards and protocols.  And we now have

13  over 300 member organizations, many of which the ARB staff

14  have become to know by first name over the last year or

15  so.  And we're very pleased to see that the lessons

16  learned through the voluntary reporting of greenhouse gas

17  inventories by our members to our organization have very

18  much so helped to inform this rule development process.

19  And so that's kind of a commending to our members as well.

20  They've become empowered and have been active and informed

21  stakeholders through this whole process.

22           And we're also pleased that the ARB staff have

23  consulted with the California Climate Action Registry

24  through the whole development process here.  And the

25  registry's standards and protocols are well reflected in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           110

 1  the regulation that is before you, especially the general

 2  stationary combustion, cement, co-generation, and

 3  verification portions of the regulation.

 4           In general, there are some differences.  And for

 5  the most part, those differences are due to the fact that

 6  our protocols were put together for voluntary reporting

 7  purposes.  And the regulations that are before you now are

 8  obviously mandatory and therefore have a lot more rigor

 9  built into them.

10           So sectors in particular where the regulations do

11  differ some are -- or more than others I guess -- not some

12  doesn't say it well -- but are the refinery section and

13  the power sector.  And as Rajinder stated, the Registry

14  protocols simply don't have guidance for the refinery

15  sector.  So ARB staff has done a wonderful job of working

16  with stakeholders to put together a very rigorous

17  accounting structure for the refining sector.

18           Also, the power utility protocol that the

19  Registry has developed was developed through a very

20  comprehensive stakeholder process.  It was completed in

21  2005, and it's a version 1.0 that's been out on the street

22  for a couple years and being used.  So our protocols being

23  living documents, it is time for them to be updated.

24  Hence, the large update.

25           So we look forward to continuing to work with you


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           111

 1  guys on the development of future programs under AB 32.

 2  Thank you.

 3           CHAIRPERSON NICHOLS:  Thank you.  Thanks for all

 4  that you contributed to this process and also for that

 5  explanation of where there are differences, why that has

 6  come to be.

 7           Taylor Miller, Darrell Clarke, Bonnie Holmes-Gen.

 8           MR. MILLER:  Good morning, members of the Board.

 9  I'll try to be very brief.

10           I have to thank staff, sorry, particularly Pam

11  Bermitch for our sector.  I'm with Sempra Energy.  And

12  STG&E is a member of CCAR and has been reporting to them.

13  We are in support of the regulation that's been proposed.

14  We did submit comments in mid November.  One of those was

15  accepted, which we certainly appreciate.  One other was

16  not.  And we continue to work with staff.  It has to do

17  with how to deal with SF 6 emissions which involve

18  numerous individual units.  So it presents a bit of a

19  challenge for us in terms of verification.

20           I would like to just take a quick second and

21  reiterate support for a comment made earlier by another

22  speaker to try to find time to help us deal with the CEQA

23  aspects of AB 32.  I think all parties involved on

24  whatever part of the spectrum could use more certainty on

25  how to deal with that.  So I'd like to put in a plug in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           112

 1  for that.

 2           With that, I'll close.  See you on the inventory

 3  item.

 4           CHAIRPERSON NICHOLS:  All right.  Great.  Thank

 5  you.

 6           MR. CLARKE:  I'm Darrell Clarke with the Sierra

 7  Club, and particularly the Angeles Chapter Executive

 8  Committee and the California Global Warming and Energy

 9  Committee.

10           I'd like to take a step back and compliment that

11  we're here doing this right now.  It seems like others are

12  still debating the whether in Washington D.C. and Bali,

13  and we've moved on to how.  I think that's fabulous.

14           And I do want to compliment staff, in particular

15  Chuck Shulock and his team.  I attended the staff workshop

16  last week and felt it was in very good hands, recognizing

17  what a big process their setting out to begin the

18  transparency, the many stakeholders, really going off to

19  what hasn't been done before.  And I thought they did a

20  great job of kicking that off and listening to

21  stakeholders on all sides.

22           And beyond that, I'm here to underscore we've had

23  joint letters from the different environmental groups that

24  have already been described to you.  So I will stop there.

25           CHAIRPERSON NICHOLS:  We have two more witnesses


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           113

 1  before we come to the end of the list.  So I think we'll

 2  try to take them both and then take our break.

 3           Bonnie Holmes-Gen and then Reheis-Boyd.

 4           MS. HOLMES-GEN:  Thank you, Chairwoman Nichols.

 5  Bonnie Holmes-Gen with the American Lung Association of

 6  California.

 7           And the American Lung Association of California

 8  of course supports strong and rapid efforts to implement

 9  AB 32 because of our concern about the lung illnesses and

10  deaths associated with air pollution and global warming.

11           We have signed on to the joint letter that you

12  heard about from statewide environmental health

13  organization.  Our three quick points are we are

14  supporting the regulation of before you.  We do think this

15  is a critical first step in AB 32 implementation.  We are

16  asking you to make a modest but significant change in the

17  regulation by requiring entities that are subject to the

18  triennial verification to fully comply with the mandatory

19  reporting requirements by 2010.  We think this would add a

20  significant strengthening component to the package.  We

21  have this reporting information earlier.  Companies would

22  have accurate information early to plan their emission

23  reduction efforts and provide a strong foundation for

24  moving forward into the regulatory phrase in 2012.

25           Secondly, we do believe that the air districts


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           114

 1  can play a valuable role in the reporting of greenhouse

 2  gas emissions, and we do urge you to continue working with

 3  the air districts to find ways to incorporate their

 4  expertise in the monitoring of local facility emissions

 5  and just to generally ensure the districts are well

 6  integrated into this process.

 7           I know you've discussed that.  We want to express

 8  our support for that effort.

 9           And we also want to express our support for ARB

10  striving to achieve transparency of emissions reporting

11  methods and data as much as possible as we move forward

12  into this important next step.

13           So those are our basic comments.  We thank you

14  for the great work you've done on this, and we look

15  forward to continuing to work with you.

16           CHAIRPERSON NICHOLS:  Thank you.

17           Ms. Reheis-Boyd.

18           MS. REHEIS-BOYD:  Wow, the closer.  Good day,

19  Chairwoman Nichols, member of the Board.  Cathy

20  Reheis-Boyd, Chief Operating Officer, Western States

21  Petroleum Association.

22           I was in Calgary yesterday.  And I was really

23  glad when I handed my passport to the officer in customs

24  and he asked me what was there for and I said to talk

25  about climate change.  And he said, "Well, thank goodness


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           115

 1  they call it climate change instead of global warming

 2  because it's been snowing for two weeks."  And I thought

 3  so there you go.  We got the terminology right.

 4           But it's an international dialogue.  And I really

 5  wanted to compliment the staff and the Board for

 6  incorporating that concept into these regulations because

 7  you are I think really establishing the linkage, which I

 8  think is really, really important as we go forward.

 9           We're here to support the proposed regulation.

10  Again, I hate to say this, but I want -- I don't want to

11  be the only one that doesn't compliment staff.  So I'm

12  complimenting the staff.  The outreach has been amazing.

13  It really has.  I mean, how they have worked with the

14  stakeholders learning about refineries and oil production

15  facilities and how they work is very, very difficult.  And

16  they really took the time to do that, which we really

17  appreciate.

18           It's a well designed program.  It's got all of

19  the right requirements:  The compliance, the reporting

20  requirements, the recordkeeping.  It's very, very good.

21  So we support also the staff's proposal on the role of our

22  friends at the district as an option for verifiers in this

23  process.  And we also support the proposal that will

24  address through the 15-day package any of these unresolved

25  issues that we have.  And we're very willing to work with


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           116

 1  that.  And also to have a process where if issues come up

 2  that you can address those with the staff and the

 3  Executive Officer as we move forward.

 4           And then lastly, I also would just like to

 5  comment on the issue of CEQA and encourage you all to take

 6  that opportunity every chance you can.  You have the broad

 7  authority under AB 32.  You have a broad authority under

 8  CEQA and to make that linkage early on in this regulation,

 9  in the next one we're going to talk about, and every one

10  from then I think will help provide the interim regulatory

11  certainty we use, because we have all have CEQA

12  guidelines.  We know those are going to be developed.  But

13  those are probably two years out.  So I think that's

14  really, really important that CEQA be first and foremost

15  on our minds as we go forward.

16           And again, thank you very much for all you've

17  done on this regulation and look forward to commenting of

18  the next one.

19           CHAIRPERSON NICHOLS:  Thank you.

20           I want to command the staff for having done a

21  terrific job of getting us to 11:30 exactly on the dot in

22  time for our break.  And honestly to echo all the good

23  things that have been said.  But it is now time to take a

24  break.

25           It's freezing in this room.  I can't be the only


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           117

 1  person who's cold.  We need to do something to raise the

 2  heat a little bit, please.  But we'll take a ten-minute

 3  break and let's try to make it ten minutes and we'll be

 4  back to discuss this.

 5           (Thereupon a recess was taken.)

 6           CHAIRPERSON NICHOLS:  Call this meeting back to

 7  order, please.  If we can get people back into their

 8  seats.

 9           What I'd like to do now is to turn to the staff.

10  And I know many of us were taking notes during the

11  testimony and had questions that we wanted to have

12  followed up on.  And so what I'd like to use this time for

13  now is to have the staff respond to those points that

14  seemed like they needed some clarification or we wanted to

15  know why you did what you did.  So if that's an acceptable

16  procedure for other folks, maybe I'll just start with a

17  couple of the key points that I heard and then others will

18  add things that seemed important to them that I may have

19  left off.

20           First, the question about why we couldn't roll

21  the date for verification for all the data to be verified

22  to the end of 2010 would be on my list.

23           And then another that came up that was kind of a

24  broader issue was the access to calculation data that went

25  into the reporting information and how it could be


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           118

 1  possible or if it would be possible for members of the

 2  public who have an interest in following this to get

 3  access to that data.

 4           I think we've talked a lot about the relationship

 5  with the districts and what their role would be.  But

 6  certainly one of the benefits of having a combined

 7  reporting system would be easier access on the part of the

 8  public to the data if people don't have computer access to

 9  everything that people could at least go to the district

10  offices rather than having to come to Sacramento or El

11  Monte to get a hold of it.  So I think that was a valuable

12  point that was made.

13           The question was raised about why the

14  transportation sector wasn't included in mandatory

15  reporting on the first go-round.  I think I know the

16  answer, but I think we should be clear about that.

17           And then there was several technical questions

18  which I think probably are going to end up being addressed

19  during the 15-day comment period, such as the issue about

20  how you attribute the hydrogen plants and how you deal

21  with the default emissions from the hydro and nuclear

22  plants.  Both of those seem to me of some importance to

23  the utility industry and to the refining industry.  But I

24  think it would be a good idea if we could at least have

25  some comments on those.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           119

 1           So those are my questions.  Maybe others want to

 2  add other questions to the list and we can sort of go

 3  through them all one by one.  I'll start with you.

 4           BOARD MEMBER D'ADAMO:  I would just add to that

 5  differentiating between anthropogenic and biogenic

 6  emissions, the point raised by Chuck White from Waste

 7  Management.

 8           SUPERVISOR HILL:  Tony Fischer from Nummi raised

 9  the question that AB 32 really doesn't apply in reporting

10  to end users.  It's the upstream that really should be

11  checked.  I guess that's more of a legal interpretation,

12  but I would like to get some clarification on that.

13           CHAIRPERSON NICHOLS:  Okay.  Any other points

14  that people want?

15           BOARD MEMBER CASE:  I don't know if it has

16  similarity, but maybe staff comment on a couple of

17  comments on duplication of reporting and how that ties in

18  with the local air districts and what are the benefits and

19  problems going either direction.

20           CHAIRPERSON NICHOLS:  Right.

21           BOARD MEMBER SPERLING:  And playing off of that

22  hydrogen question, I think the real question there is how

23  does the responsibility for reporting relate to the point

24  of regulation?  In other words, if hydrogen in this case

25  is kept separate from the refinery, when we adopt a cap on


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           120

 1  the refineries or low carbon fuel standard also, does it

 2  set any precedent or create any problems when we designate

 3  point of regulation?

 4           CHAIRPERSON NICHOLS:  Right.  Okay.  So could we

 5  just ask you to run through those?

 6           EXECUTIVE OFFICER GOLDSTENE:  Yeah.  Ms. Terry

 7  will begin.

 8           DEPUTY EXECUTIVE OFFICER TERRY:  I'll start with

 9  the easy ones and give staff the tough ones.

10           The easy one is on the verification issue and the

11  acceleration.  And our initial proposal was simply based

12  on a resource issue.  And we really wanted to be sure that

13  there would be adequate number of verifiers for the most

14  significant sources.  So we've proposed staggering it

15  initially.

16           We've since looked at it, and we are going to

17  gear up this program.  And we expect to have adequate

18  number of verifiers.  So if the Board so desires, we are

19  very supportive of making that change.

20           CHAIRPERSON NICHOLS:  Thank you.

21           DEPUTY EXECUTIVE OFFICER TERRY:  In terms of the

22  public access to data, this is a really important one to

23  clarify.  This is an extremely comprehensive regulation.

24  The 130 pages or so of very prescriptive data that must be

25  provided to the Air Resources Board.  Ever piece of that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           121

 1  data that is reported to the Air Resources Board is public

 2  information with the exception of those things that fall

 3  under the very specific trade secret provision of state

 4  law.  And our attornies can speak to that.  And we will

 5  make every effort in our online reporting.  That is will

 6  facilitate reporting by those subject to the regulation.

 7  But at the same time, we are going to focus on an online

 8  system the public can have access to the data, provide

 9  user-friendly reports, as well the underlying data that is

10  reported to ARB is all public information without

11  exception.

12           CHAIRPERSON NICHOLS:  That's really good to hear.

13  Now, are you saying then that the tool has not actually

14  been developed yet?

15           DEPUTY EXECUTIVE OFFICER TERRY:  It has not been

16  developed yet.

17           CHIEF COUNSEL JENNINGS:  Just to clarify that.

18  All the emissions data is public.  But data used to

19  calculate the emission data can be withheld if it

20  qualifies as trade secret.

21           CHAIRPERSON NICHOLS:  How did we determine

22  whether it does qualify as a trade secret?  How will that

23  be determined?

24           CHIEF COUNSEL JENNINGS:  Under our regulations,

25  people designate it as trade secret.  And if there is a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           122

 1  request for disclosure of it, we ask the company to

 2  demonstrate that it meets all the criteria for trade

 3  secret.

 4           CHAIRPERSON NICHOLS:  So there's a mini contested

 5  hearing or proceeding on this?

 6           CHIEF COUNSEL JENNINGS:  Under our regulations,

 7  yes, there's a process of evaluating whether it qualifies

 8  or not.

 9           CHAIRPERSON NICHOLS:  Okay.

10           BOARD MEMBER BERG:  Madam Chair, may I ask a

11  quick question?  Is this type of reporting any different

12  from other emissions reporting such as the TRI Form R or

13  the toxic hot spot?  Are we following the same type of

14  transparency?

15           DEPUTY EXECUTIVE OFFICER TERRY:  In terms of the

16  data availability, yes.  You're not talking about the

17  reporting tool, but the access piece?

18           BOARD MEMBER BERG:  Correct.  I'm talking about

19  the access piece.

20           DEPUTY EXECUTIVE OFFICER TERRY:  Right.

21           CHAIRPERSON NICHOLS:  Okay.  Continuing on.

22           DEPUTY EXECUTIVE OFFICER TERRY:  Supervisor Case

23  mentioned the duplication issue relative to air districts,

24  and I just wanted to assure the Board that we really do

25  intend to work closely with the air districts on this


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           123

 1  reporting tool issue.

 2           Now, facilities are subject to federal law, State

 3  law, and local requirements.  And so when we developed

 4  this tool, one of the rationales is to facilitate their

 5  reporting processes for these multiple obligations.  So we

 6  think as we develop these reporting tools in conjunction

 7  with districts, we will be able to develop tools that will

 8  help meet both their district reporting needs as well as

 9  their State reporting needs.  And I have all confidence

10  that the technical staff can come up with something that

11  does that.

12           CHAIRPERSON NICHOLS:  Now, as of today,

13  individual districts have their own reporting

14  requirements.  They're subject to our oversight and

15  federal oversight if the sources are large enough to

16  comply to be subject to Title 5.  But I assume there's

17  quite a bit of variation on a district to district basis.

18           DEPUTY EXECUTIVE OFFICER TERRY:  There is.  And

19  there's also a variation in terms of district resources

20  among the 35 air districts.  So some of the larger

21  districts are already on board, as Dr. Wallerstein talked

22  about and the Bay Area in particular.

23           What we have done is made an offer to the smaller

24  districts that we will develop and pay for development of

25  an interface computer tool that will allow their systems


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           124

 1  to be linked to ours as a way of ensuring that the

 2  information that comes directly to us from regulated

 3  facilities can be transferred back to the district so that

 4  they can reconcile information coming to the state, for

 5  example, fuel consumption.  This is a check on the

 6  existing criteria pollutant data bases.

 7           CHAIRPERSON NICHOLS:  So I guess in the long run,

 8  although this isn't an objective of the rule, one of the

 9  benefits that could accrue from having the districts

10  involved in developing this statewide tool would be it

11  could drive us in the direction of more consistent

12  reporting protocols throughout the state for everybody,

13  which would be a big benefit not only for those sources

14  that operate in more than one district, but also for

15  citizen organizations that are looking to get comparable

16  data out of the system also.

17           DEPUTY EXECUTIVE OFFICER TERRY:  That's how we

18  see it.

19           BOARD MEMBER CASE:  And Madam Chairman, maybe we

20  should suggest through CAPCOA that they look at if there's

21  an opportunity to work together, pool their resources

22  together to do some systems that would be usable across

23  the board and then have it interface with the ARB data

24  systems, it could really improve our system of efficiency

25  and also be very helpful to those that are in the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           125

 1  regulated community.

 2           CHAIRPERSON NICHOLS:  Right.

 3           DEPUTY EXECUTIVE OFFICER TERRY:  On the issue of

 4  transportation sector, that comment came early in the

 5  process and it's such an obvious one that the

 6  transportation sector is key to the solution from a

 7  programmatic standpoint.

 8           This mandatory reporting is focused on

 9  facilities.  Of course, in the next item, you will hear

10  about the inventory and transportation will be prominent

11  in there.  So it's certainly not lost in terms of looking

12  at where the emissions lie.

13           The other and important issue relative to the

14  hydrogen plants was the point of regulation issue.  And

15  again it's sort of the cart before the horse that this

16  regulation in staff's view does not set any precedent in

17  terms of the actual program development.  But it is

18  intended to meet the early statutory requirements of AB 32

19  relative to reporting.

20           And with that --

21           PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

22  MURCHISON:  If I can make a clarification on the hydrogen

23  plants, too.  There was some concern about whether or not

24  hydrogen plants associated with refineries would be

25  separated, because we require the operational control to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           126

 1  report the emissions.  Where a hydrogen plant is under the

 2  operational control of refineries, it does come in with

 3  refinery emissions.  It's only in the case where it's

 4  separated and operated under somebody else that it's

 5  reported separately.

 6           CHAIRPERSON NICHOLS:  So if there were a hydrogen

 7  plant -- and I don't know if this is actually a real world

 8  situation.  But if a refiner had invited someone onto

 9  their premises which was a separate company or had set up

10  a separate company to operate the hydrogen plant, that

11  hydrogen plant would not be treated as part of the same

12  facility?

13           PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

14  MURCHISON:  That's correct.

15           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  There are

16  merchant hydrogen plants, and they serve more than one

17  customer.  You have to apportion the supply to various

18  customers.

19           And also on transportation fuels, accounting for

20  the fuels and doing reporting is going to be intensive

21  part of the low carbon fuel standard and that regulation,

22  because we're going to have to go into great detail of how

23  we determine what the various emissions are associated

24  with all of the different transportation fuels.  So we'll

25  be addressing that issue next year as part of that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           127

 1  regulation.

 2           CHAIRPERSON NICHOLS:  Well, just to push this a

 3  little bit further though, because I'm sympathetic to the

 4  point that was made by CBE.  Is there a way in which this

 5  hydrogen plant's emissions would, in effect, escape

 6  reporting or whereby an interested community group would

 7  be unable to find out what was being emitted because of

 8  this bifurcation?  I understand the rational for doing it

 9  that way.  There is a rational for doing it that way.

10           But the question is, what is the impact of that

11  going to be in terms of people's actually being able to

12  figure out what's coming at them, you know, at the fence

13  line level.  Understanding that CO2 itself is not a

14  localized pollutant, but they're trying to figure out

15  what's going on at the local level.

16           DEPUTY EXECUTIVE OFFICER TERRY:  And that's

17  fundamental to the design of the regulation which is

18  facility based.  So I think the more pertinent point is

19  how we deal with it in the regulatory phrase.

20           But in terms of the emissions, it really has no

21  impact.  The requirement is identical.  They can go down

22  to the unit level of these facilities whether they're on

23  site at a refinery or off.

24           CHAIRPERSON NICHOLS:  So if a facility is big

25  enough to be within the scope of this rule at all, it's


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           128

 1  going to be uncovered.

 2           DEPUTY EXECUTIVE OFFICER TERRY:  I'm going to

 3  turn it back to staff.  There were a number of technical

 4  questions on the power sector perhaps.  I think Mary had a

 5  couple there.

 6           On the biogenic, just a quick clarification.  The

 7  bottom line is on landfills, that is an early action item,

 8  and there's a separate process going on to look at

 9  reductions.  And as part of that, the reporting issue will

10  be addressed in terms of methane.  So there is no

11  requirement to report methane as part of this regulation

12  that's being dealt with in a parallel process.  The only

13  thing landfills will report now going forward are their

14  combustion emissions.

15           BOARD MEMBER SPERLING:  Could I add to that?  You

16  know, it just points out the fact that we have to be very

17  careful in doing good life cycle analysis as we develop

18  the other tools.  You know, because it all comes down to

19  how that -- where that carbon or methane came from.  So I

20  think that's the real lesson there.  Probably just leave

21  it at that.

22           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

23  You're took all the easy ones.  I'm going down through my

24  list.  You answered the biogenic anthropogenic.

25           The next question I had was from Mr. Miller at


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           129

 1  Sempra about the sulfur hexafluoride and combining those

 2  emissions.  And that is done as part of our modifications

 3  that we're bringing to the Board today.

 4           And I think the other one we had was from Greg

 5  Klatt.  This is regarding the default of emission factors

 6  for new contracts.  And the power sector -- and correct

 7  me, Doug, on this one -- is part of our recommendations

 8  now are based on the recommendation we receive from Public

 9  Utilities Commission and CEC and their process.  That is

10  an ongoing process too as they move ahead and especially

11  as they move ahead into the regulatory sphere itself.  So

12  that might be one that ARB and the staff from those

13  agencies work on.

14           PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

15  MURCHISON:  And then if I could, I'll jump in there, too.

16  We had a comment from Tony Fischer, and this is regarding

17  the requiring facilities to report their indirect energy

18  usages.  And we did that because AB 32 is clear we need to

19  account for all the electricity consumed in the state.

20  Even though we are requiring retail providers to report,

21  we thought it was important to clearly understand the

22  footprint at each individual facility and what they're

23  responsible in terms of not only their process and

24  combustion, but their activities as well.  And that would

25  involve the indirect energy use.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           130

 1           And we think it's also important as we move

 2  forward in looking at ways of reducing those footprints in

 3  our overall greenhouse gas obligation, we look at things

 4  like energy efficiency that it's important to know what

 5  individual companies are using and how we might address

 6  that from an efficiency perspective.

 7           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

 8  And Mr. Little from Southern California Edison mentioned

 9  that alternative approaches for reporting.  As we move

10  forward in the regulatory program, this is for power.  As

11  that adapts as the regulatory agencies get involved that

12  our reporting approach adapt as well.  That's certainly

13  what we're planning to do.  I think we might have

14  mentioned it in our presentation, but it's definitely that

15  when we get better indications of what happens with the

16  Public Utilities CEC recommendations and ARB as we move

17  ahead, we'll adapt our reporting program to that.

18           Mr. Wallerstein talked about bringing auditing

19  plan to the Board.  And definitely when we come back next

20  year we can do that.  But that's for the verification.

21           I'm going through my list, and I think that's

22  just about all of it.

23           CHAIRPERSON NICHOLS:  Are there any questions?

24           HEALTH AND EXPOSURE ASSESSMENT BRANCH CHIEF BODE:

25  The de minimis question.  What might be left out.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           131

 1           CHAIRPERSON NICHOLS:  To detract that.  I think

 2  this was really a request that we report on that issue.

 3           CLIMATE CHANGE REPORTING SECTION MANAGER

 4  THOMPSON:  Yes.  Tim O'Connor raised that question and we

 5  indeed will sit with him and try to explain what the

 6  impact is.  We do think it's quite minimal.  I want to

 7  emphasize de minimis emissions are indeed reported

 8  emissions.  This is essentially a mechanism by which

 9  facilities are able to use alternative means to calculate

10  those emissions.  And we think the impact will not have

11  much bearing on the data that we receive.

12           DEPUTY EXECUTIVE OFFICER TERRY:  But we will

13  track the information and report back.

14           CHAIRPERSON NICHOLS:  All right.

15           Yes.  Ms. Berg.

16           BOARD MEMBER BERG:  If staff could just comment

17  on the duplicative reporting up and down the supply chain.

18  And I understand this first year will be our pilot year.

19  But how do we plan on identifying those things and

20  simplifying as we go along?

21           PLANNING AND TECHNICAL SUPPORT DIVISION CHIEF

22  MURCHISON:  We developed our reporting regulations for the

23  power sector based on recommendations from the California

24  Public Utilities Commission and the California Energy

25  Commission.  But we recognize that we are requiring -- we


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           132

 1  are collecting duplicative information.

 2           As we move forward in the program and better

 3  defined where the point of regulation will be in the power

 4  sector, then we agree it makes perfect sense to come back

 5  and amend this regulation and focus just on the

 6  information that's needed to support that.

 7           BOARD MEMBER BERG:  Thank you very much.

 8           CHAIRPERSON NICHOLS:  Okay.  If there are no

 9  further questions by the Board members, I think it's time

10  to bring this to a conclusion.  Staff want do make any

11  final comments?  Closing comments?

12           EXECUTIVE OFFICER GOLDSTENE:  No.

13           CHAIRPERSON NICHOLS:  Good.  Okay.  I'm happy to

14  entertain a resolution.  Before we do, I think because of

15  the regulatory nature of the item we need to disclose any

16  ex parte communications that we may have had.  So people

17  can look at their folders and their notes.

18           I'll start with mine.  I had a conversation by

19  phone.  I was on the phone with Elroy Garcia and Casey

20  Bishop, and that repeated the substance of what we heard

21  here.

22           And my notes show a meeting with Devra Wang of

23  NRDC on November 20th.  I cannot actually remember that we

24  had that meeting.  But if we did, I'm sure it didn't

25  differ materially from what she testified to here today.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           133

 1           We'll start down at this end.

 2           BOARD MEMBER BERG:  Thank you, Madam Chair.  I'm

 3  glad I'm not the only one as I look over my list going,

 4  huh.

 5           I just have one phone call with Cathy

 6  Reheis-Boyd, and that was on December 4th.  And she is

 7  from the Western States Petroleum Association.  And our

 8  conversation mirrored the testimony today.

 9           BOARD MEMBER D'ADAMO:  I had a telephone

10  conference call with Diane Bailey, Devra Wang, NRDC; John

11  Kaltenstein, Friends of the Earth.  And the discussion was

12  consistent with the testimony they presented today.

13           And then on December 5th, I had a conference

14  call, and my notes don't accurately reflect all the

15  individuals that participated in the call.  So I'm going

16  to just go with what I recall.  Elroy Garcia, Western

17  States Petroleum; Casey Bishop with Chevron.  And then

18  there were two other individuals, and they raised the

19  concern regarding CEQA that Ms. Reheis-Boyd included in

20  her testimony today.

21           SUPERVISOR HILL:  Madam Chair, on December 5th, I

22  had a conversation telephone conversation with Tony

23  Fischer from Nummi.  And his conversation was consistent

24  with his testimony today.

25           And I may have had a conversation with a number


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           134

 1  of -- Diane Bailey and Devra Wang over this issue.  It may

 2  have been November the 26th.  But I don't see it here.  We

 3  were discussing other issues, and it would have been

 4  consistent with the testimony today.

 5           BOARD MEMBER CASE:  On November 28th, I had a

 6  conversation with several folks over three agenda items,

 7  but this item was included in my -- it was a

 8  teleconference call with Bonnie Holmes-Gen with American

 9  Lung Association; Devra Wang with NRDC; John Kaltenstein

10  Friends of the Environment; Rupal Patel, the Communities

11  for Clean Ports -- excuse me.  That's on the other item.

12  And Don Anair with the Union of Concerned Scientists.  And

13  they just briefly commented consistent with today's

14  testimony.

15           CHAIRPERSON NICHOLS:  Any others?  Okay.

16           BOARD MEMBER HILL:  I'd like to move the

17  resolution, if I may, with the one change of the

18  verification would begin in 2010 for all reportable

19  sources.

20           BOARD MEMBER CASE:  Second.

21           CHAIRPERSON NICHOLS:  It's been moved and

22  seconded.

23           I sense that we probably have a unanimous vote

24  here.  Are there any dissenters?

25           Very good.  Regulation is adopted.  Thank you


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           135

 1  very much.  This is really a great start.

 2           I imagine there's going to be a shift of cast of

 3  characters here before we move to the next item.  Do we

 4  need a minute to sort things out?

 5           We're going to get started on the 1990 statewide

 6  greenhouse gas emissions level and 2020 emissions limit.

 7  So more AB 32.

 8           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

 9  Nichols.

10           Staff will now present a proposed 2020 greenhouse

11  gas emission limit and describe the technical basis for

12  how they got there.

13           Under AB 32, the 2020 limit must be set equal to

14  California's 1990 emissions as determined by the Board.

15  In developing the 19190 emission level, staff completed a

16  comprehensive review of the statewide emissions inventory

17  initially developed by the California Energy Commission.

18  As a result of this review, several updates and

19  refinements have been made.  Staff will continue the

20  inventory improvement process as AB 32 implementation

21  proceeds.  Jamesine Rogers from the staff will make the

22  presentation.

23           (Thereupon an overhead presentation was

24           presented as follows.)

25           MS. ROGERS:  Good afternoon, Chairman Nichols and


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           136

 1  members of the Board.  My name is Jamesine Rogers, and I

 2  will be presenting this staff's proposed for establishing

 3  the 1990 emissions level and the 2020 emissions limit as

 4  required by the Global Warming Solutions Act of 2006.

 5                            --o0o--

 6           MS. ROGERS:  Here is a overview of my

 7  presentation today.  First, I will briefly summarize the

 8  statutory requirements of the Act, often referred to as AB

 9  32, as it pertains to the 1990 emissions level and 2020

10  emissions limit.

11           Then I describe how we determined the 1990

12  emissions level and what improvements we made.

13           I will also talk about the preliminary 2020

14  emission projection to provide some context for you.

15           The difference between the emissions limit that

16  you are considering today and the 2020 projected emission

17  is the amount of greenhouse gas reductions needed to

18  achieve the 2020 limit.

19           I will also discuss key comments and issues

20  raised by stakeholders during the development of the 1990

21  emissions level.

22           Finally, I will provide our recommendation for

23  the statewide 2020 emissions limit based on the 1990

24  level.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           137

 1           MS. ROGERS:  AB 32 requires that the Air

 2  Resources Board determine the 1990 emission level using

 3  the best available scientific, technological, and economic

 4  information.

 5           The 1990 level is the total amount of greenhouse

 6  gases emitted statewide in 1990 and is equivalent to the

 7  emissions limit that must be achieved by the year 2020.

 8           The Act states that the 2020 limit will remain in

 9  effect unless amended by the Board.  We will only bring it

10  back to the Board if there is a change that significantly

11  alters the 1990 level.

12                            --o0o--

13           MS. ROGERS:  You have seen this slide in previous

14  AB 32 presentations.  It shows the sequence of

15  implementation milestones for AB 32.

16           The action we are addressing today is highlighted

17  in yellow.  The Act requires that the Air Resources Board

18  determine the 1990 emissions level and approve the 2020

19  limit by January 1, 2008.

20           Over the next year, ARB staff will be developing

21  a scoping plan that identifies the mix of measures and

22  mechanisms needed to reduce greenhouse gas emissions to

23  the 2020 limit.

24           It will be brought before this Board in November

25  2008.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           138

 1                            --o0o--

 2           MS. ROGERS:  I will now discuss how we developed

 3  the 1990 emissions level.

 4                            --o0o--

 5           MS. ROGERS:  As I said earlier, the 1990

 6  emissions level is based on the emissions of greenhouse

 7  gases or the emissions inventory.

 8           In estimating the 1990 inventory, we included all

 9  six Kioto gases:  Carbon dioxide, methane, nitrous oxide,

10  perfluorocarbons, hydrofluorocarbons, and sulfur

11  hexaflouride from all major sources in California.

12           In order to look at the total impact of these six

13  gases on climate change, we use the international

14  convention of expressing them in a common metric called

15  carbon dioxide equivalents, or CO2e.  We do that by using

16  global warming potential for each gas as established by

17  the Intergovernmental Panel on Climate Change.

18           The 1990 inventory also includes estimates of

19  emission sinks, which sequester carbon by taking carbon

20  dioxide out of the air and storing it in California's

21  forests.

22                            --o0o--

23           MS. ROGERS:  Prior to this year, California's

24  greenhouse gas emissions inventory was maintained by the

25  California Energy Commission.  State law transferred that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           139

 1  responsibility to the Air Resources Board in January.

 2           Using CEC's inventory as a starting point, we

 3  undertook a comprehensive review and update of the

 4  existing estimates, making improvements using new

 5  information where available, and updating methodologies

 6  for some categories.

 7           Throughout this review and update process, we

 8  strived to be as consistent with international guidelines

 9  for greenhouse gas development as possible.

10                            --o0o--

11           MS. ROGERS:  The result is a variety of

12  improvements that have been made to the 1990 inventory

13  over the past year including:

14           Improved methods to estimate emissions from

15  transportation and landfills compared to the CEC's

16  approach.

17           Facilities specific data for certain categories

18  and cement manufacturing in particular.

19           And updated data inputs primarily for fuel

20  combustion related emissions.

21           We've received considerable assistance in the

22  form of improved data from many agencies during this

23  process, including the Integrated Waste Management Board,

24  CEC, and some federal agencies.

25           We also developed extensive documentation for the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           140

 1  inventory to ensure that our methods and sources of data

 2  were clearly outlined for the public and stakeholders to

 3  review.  Over 12,000 pages of documentation are available

 4  on the web and on CD.

 5           We have set up a demonstration of that

 6  documentation at the back of the room today for those who

 7  are interested in learning more about it.

 8                            --o0o--

 9           MS. ROGERS:  Our review and improvements focused

10  on the five key sectors listed on this slide.  These

11  sectors together represent roughly 80 percent of total

12  greenhouse gas emissions in 1990.

13           The transportation sector includes on-road

14  vehicles, ships, trains, planes.

15           We improved emissions estimates for on

16  road-vehicles, which were the largest fraction of this

17  sector's emissions using ARB emission factors and updated

18  fuel sales data.

19           We also improved factors CEC's nitrous oxide

20  estimates from diesel vehicles.

21           We followed a methodology similar to the CEC's

22  for estimating emissions from in-state and imported

23  electricity generation.

24           We also considered line losses and more

25  comprehensively characterized imports resulting in a 40


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           141

 1  percent increase in 1990 import emissions.

 2           The entire industrial sector was included in the

 3  review, but our focus was on emissions from cement

 4  manufacturing, landfills, and petroleum refining.  We

 5  updated the data inputs for these three and used an

 6  improved methodology for landfill emissions.

 7           Finally, we updated emissions estimates for the

 8  agriculture and forest sectors using similar methodologies

 9  as the CEC, as well as data provided by other agencies.

10           The remaining 20 percent of emissions occur in

11  the residential and commercial sectors as a result of

12  combustion activities such as heating and cooking.

13                            --o0o--

14           MS. ROGERS:  Stakeholder input was vital

15  throughout the development of the 1990 emissions level.

16  To ensure that the inventory was built on a solid

17  technical foundation, we held nine technical meetings with

18  stakeholders and experts in the respective sectors.

19           We also held five general public workshops.

20  Stakeholders have provided valuable input through these

21  meetings, workshops, and other outlets which we greatly

22  appreciate.

23                            --o0o--

24           MS. ROGERS:  The result of this process is an

25  improved 1990 greenhouse gas emission inventory.  This


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           142

 1  slide shows the relative contributions of the key sectors

 2  to the 1990 inventory.

 3           The transportation sector is the largest

 4  accounting for 35 percent of all emissions in 1990.  This

 5  number has increased to roughly 40 percent today.

 6           Combined in state and imported electricity

 7  generation is the next highest with the industrial sector

 8  a close third.

 9           The overall contribution from transportation

10  emissions decreased a bit compared to the CEC's 1990

11  estimate, while electricity generations contribution

12  increased due to inventory improvements.

13                            --o0o--

14           MS. ROGERS:  In developing the 1990 emissions

15  level, we included all emissions occurring in California

16  from these sectors to the atmosphere and the sequestration

17  or removal of carbon dioxide from the atmosphere by the

18  state's forest sinks.

19           AB 32 specifically requires that the level also

20  include emissions associated with electricity that's

21  imported to California.

22           Given the anticipated growth in goods movement in

23  the coming years, we thought it was important to include

24  emissions from all ships traveling within 24 nautical

25  miles of the California coast to or from a California


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           143

 1  port.  This is consistent with ARB's goods movement

 2  program inventory.

 3           The 1990 level includes emissions from flights

 4  within California as well.

 5                            --o0o--

 6           MS. ROGERS:  We have chosen to not include

 7  emissions from certain types of sources based on

 8  international conventions for greenhouse gas inventories.

 9                            --o0o--

10           MS. ROGERS:  International practice recommends

11  tracking, but not including, all international shipping

12  and aviation in the total inventory estimates.

13           While we choose to include internationally

14  flagged ships traveling within 24 nautical miles of the

15  California cost, the 1990 level excludes emissions from

16  all ships traveling outside of these waters.  The 1990

17  level excludes interstate and international flights to be

18  consistent with the international approach of only

19  including emissions from flights within a jurisdiction's

20  borders.

21                            --o0o--

22           MS. ROGERS:  Based on the improvements made, we

23  have estimated the 1990 emissions level to be 427 million

24  metric tons of carbon dioxide equivalent.  This is an

25  aggregated statewide level.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           144

 1           You may notice that the proposed 1990 level is

 2  very similar to the 1990 emission estimates from the

 3  Climate Action Team and CEC.  There are some important

 4  differences among individual sector emission estimates.

 5  But in aggregate, the 1990 estimates are quite similar.

 6                            --o0o--

 7           MS. ROGERS:  In order to put the 1990 emissions

 8  level and 2020 limit in context, we also estimated a

 9  preliminary 2020 emissions projection.  Although not part

10  of today's action, it is important to understand the tons

11  of reduction that will be needed to get from the 2020

12  projected emissions to the 2020 emissions limit as

13  estimated by the 1990 level.

14                            --o0o--

15           MS. ROGERS:  The 2020 emission projection is the

16  estimated emission level that would occur in 2020 if

17  California did not take additional actions to reduce

18  emissions.

19           The difference between this projection and the

20  2020 limit that we are proposing today determines the

21  magnitude of emission reductions that must be addressed by

22  the scoping plan.

23           We estimated the 2020 projection using ARB and

24  CEC data to be approximately 600 million metric tons of

25  carbon dioxide equivalent.  The difference between this


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           145

 1  preliminary estimate of 600 and the 1990 level of 427 is

 2  173 million metric tons of carbon dioxide equivalent.

 3           We will continue to refine this 2020 projection

 4  in the coming months as we develop the scoping plan.

 5                            --o0o--

 6           MS. ROGERS:  I'd like now like to discuss some

 7  issues that were brought up during the public process and

 8  how we are addressing them.

 9           We continue to receive comments on three sector

10  related issues in particular and their effects on the 1990

11  emission level:  Electricity imports, forestry, and

12  landfills.

13                            --o0o--

14           MS. ROGERS:  One of the major topics of

15  discussion in the development of emission estimates for

16  the power sector was the assumption used to estimate

17  emissions from imported electricity that cannot be traced

18  back to a specific facility or fuel type.

19           The CEC examined this issue in 1990 and again

20  1992.  The Commission held several hearings and took

21  testimony from stakeholders before determining what

22  methodology should be used for calculating emissions from

23  unspecified sources.

24           Based on those hearings, the Commission

25  recommended a set of assumptions for attributing regional


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           146

 1  unspecified power to certain fuel types.  Some

 2  stakeholders disagree with the CEC's recommendation.

 3           The CEC reiterated its recommendation to us in a

 4  recent letter.  Staff reviewed the assumptions and agree

 5  with the CEC's findings and recommendations.

 6                            --o0o--

 7           MS. ROGERS:  The forest sector has proven to be a

 8  challenging sector, but an extremely important one.

 9  Sequestration of carbon by trees is an important element

10  in our overall determination of greenhouse gas emission

11  levels.

12           We have worked closely with our sister agency,

13  the California Department of Forestry and Fire Protection,

14  and U.S. Forest Service, to determine the best available

15  information for estimating forest sequestration.  However,

16  this sector requires more evaluation, and we have formed a

17  work group of agencies and stakeholders to improve

18  estimates of forest stocks and forest emissions and

19  sequestration.

20           The last issues are related to landfills.  There

21  are differing opinions concerning the best value for

22  landfill gas collection efficiency and how to best account

23  for carbon stored in landfills.  The 1990 estimate uses

24  U.S. EPA default values for landfill gas collection

25  efficiency since no scientifically rigorous data is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           147

 1  available.

 2           Moving forward, we will continue to work with

 3  stakeholders to improve collection efficiency estimates as

 4  part of the early action regulatory process.

 5           Whether or not landfills and other sectors

 6  receive credit for carbon storage will be addressed

 7  through the broader AB 32 planning process.

 8           After an extensive review and update of the 1990

 9  emissions level, we recommend the Board above a 2020

10  emissions limit of 427 million metric tons of carbon

11  dioxide equivalent based on the 1990 emissions level.

12           This concludes my presentation.  We would be

13  happy to answer any questions.  Thank you.

14           CHAIRPERSON NICHOLS:  Do Board members have

15  questions before we hear from the public on this item?

16  Does anybody have any questions about the methodology or

17  any of the issues?

18           Okay.  Let's move directly to the public hearing

19  portion.  We have eleven witnesses who have signed up on

20  this item.  So I'll just call them in order.  I'm tempted

21  to make her first because she was the last, but she is a

22  actually number two on the list.  Jill Whynot first and

23  then Cathy Reheis-Boyd followed by Norman Pedersen.

24           MS. WHYNOT:  Good afternoon, Chairman Nichols and

25  members of the Board.  My name is Jill Whynot.  I'm one of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           148

 1  the staff members of the South Coast AQMD.  We wanted to

 2  come up today and commend the staff for what we think is a

 3  comprehensive and thorough job on a very difficult task of

 4  back casting an inventory to 1990.  We feel they have used

 5  to latest models and the best information available.

 6           We actually did some cross checking for our

 7  portion of the inventory.  We looked at on- and off-road

 8  sources and stationary sources, and things looked very

 9  reasonable.  So we think they did a great job on that.

10           As with any inventory, as you know, especially

11  with the mobile sources, we feel they probably will need

12  to bring the 1990 inventory back to you in the future as

13  new information and better information becomes available.

14  But in summary, we support the 1990 inventory today as the

15  target for the state and think your staff did a great job.

16           CHAIRPERSON NICHOLS:  Thank you.

17           Ms. Reheis-Boyd.

18           MS. REHEIS-BOYD:  Thank you again, Chairman

19  Nichols, members of the Board.  Cathy Reheis-Boyd, Western

20  States Petroleum Association.  We're also here today to

21  support this regulation on inventory.

22           I want to make sure we are going to bank up all

23  these great compliments because, just a guess, I think

24  going forward we might have a little more contentious

25  issues to deal with.  Just don't want to staff to get too


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           149

 1  comfortable.

 2           But basically very pleased at the amount of work

 3  that's gone into the inventory.  The adjustments that have

 4  been made by the staff for our sector in particular, I

 5  mean it was really difficult going back and finding

 6  missing data for the past 17 years.  So just a yeoman's

 7  job on this.

 8           Since it was so difficult and complex, I really

 9  do think it took our collective wisdom to get this as good

10  as it is.  And we all know there are issues going forward.

11  But I think what we learned is that we really needed each

12  other.  All of the stakeholders needed each other in this

13  process to fill the gaps and make this the best inventory

14  we could going into '08.

15           We also appreciate the willingness of the staff

16  to true up the inventory as we get any new information

17  going forward.  And that will be very important,

18  especially if we learn something significant, which we

19  might.

20           So just in short, the accuracy of this inventory

21  is really critical, because it's going to set the stage

22  for everything we do going forward.

23           We're very happy that hopefully when 2020 rolls

24  around and we all look back at this that we got it right.

25  And if we didn't, that we were smart enough to pause and


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           150

 1  correct anything that we learned along the way.

 2           So thank you.  And we will be working hand in

 3  hand with you going through this regulation as well.

 4  Thank you very much.

 5           CHAIRPERSON NICHOLS:  Thank you.

 6           Norman Pedersen followed by Sean Edgar and Greg

 7  Knapp.

 8           MR. PEDERSEN:  Thank you, Chairman Nichols and

 9  members of the Board.  I'm Norman Pedersen for the

10  Southern California Public Power Authority, SCPPA.

11           I, too, would like to compliment the staff on the

12  excellent job they did.  However, we think that some

13  further work is still needed to get the accurate 1990

14  figure that I think we all want to have.

15           SCPPA is concerned that the 1990 total emission

16  figure that you've been presented today may be inaccurate

17  as it stands.  Particularly, we believe there has been an

18  understatement of the 1990 emissions associated with

19  imported electricity.  According to the staff, electricity

20  generation accounts for about 111 million tons or 26

21  percent of total 1990 statewide emissions, the 427 million

22  tons figure.

23           Approximately a third of the electricity figure,

24  31 million tons, are associated with what are called

25  unspecified imports.  We believe that the 31 million ton


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           151

 1  figure for unspecified imports may be low by as much as 20

 2  million tons.  In other words, the figure for unspecified

 3  imports may below by 40 percent.

 4           The staff's figure, as the staff explained this

 5  afternoon, was taken from the CEC.  The figure relied on

 6  certain CEC assumptions about how electricity is

 7  dispatched from particularly the pacific northwest.  We

 8  are concerned that the assumptions do not accurately

 9  reflect how electricity is actually dispatched from the

10  pacific northwest.

11           In order to allow this issue and issues like it

12  to be more thoroughly vetted for particularly the electric

13  sector, SCPPA urges the Board to permit the 1990 figure to

14  continue to be refined.  Thank you very much for this

15  opportunity to appear before you today.

16           CHAIRPERSON NICHOLS:  Thank you Mr. Petersen.

17           Sean Edgar, Gregg Knapp, and then Chuck White.

18           MR. EDGAR:  Madam Chair and Board members, Sean

19  Edgar appearing before you on behalf of the California

20  Refuse Removal Council.  You have a copy of our letterhead

21  of the CRRC.

22           And I'd also like to join in the staff love fest

23  especially for the item.

24           And off line, I'll be talking to Mr. Goldstene

25  for his barber's phone number.  I'll soon be joining him.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           152

 1  But I'll be part of Mr. Goldstene love fest a little bit

 2  later on.

 3           CHAIRPERSON NICHOLS:  Starting to get too

 4  personal I think.

 5           MR. EDGAR:  And I'd like to compliment staff on

 6  recognizing specific to the item in the forestry sink

 7  item.  So specific to the staff recommendation for how to

 8  account for forestry sinks.

 9           You'll hear from major landfill company

10  representatives again today about the issue that

11  sequestration of organics in the landfill should be

12  counted in the inventory as a carbon sink.

13           CRRC is before you today to once again express

14  their strongly held in support of California's long

15  standing waste management hierarchy that all materials be

16  properly managed in order to maximize the diversion of

17  material from landfills and manage all materials to their

18  highest and best use in accordance with the adopted state

19  hierarchy which has been in place since 1989.

20           There is no question that there is a place for

21  well-managed properly safe disposal of non-marketable

22  residuals in California.  The issue is how do we account

23  for those.  And the staff has hit the nail on the head in

24  this particular case.  And specifically your sister board,

25  the California Integrated Waste Management Board, has


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           153

 1  adopted a strategic directive to in fact reduce the amount

 2  of organics that goes into the landfills 50 percent by

 3  2020.

 4           As we related to your earlier item to action at

 5  the local level, our companies are primarily family

 6  operations serving more than eight million Californians

 7  with curbside recycling service every week and somewhere

 8  in excess of 150 communities throughout the state.  And

 9  those family operated companies certainly want to note

10  that the recycling efforts are recognized as part of the

11  AB 32 process.

12           Just to touch on a few high points in our letter

13  and then I would be happy to sit down.  CRRC believes the

14  recycling and composting of organic materials needs to

15  occur first.  The landfill should not be incentivized to

16  be the first stop.  The landfill should be the last stop.

17  So with regard to the inventory figures that your staff

18  has in fact gotten it right specific to the carbon flux

19  table and diagram that's located in Appendix B of your

20  staff report.

21           And just to touch on sequestration as we

22  understand it, it's commonly understood to be the uptake

23  and long term storage of carbon.  The sequestration of

24  greenhouse gases pertains to lumber and yard waste occurs

25  during the period of plant growth.  The contention has


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           154

 1  been made landfill disposal of wood and compostable

 2  organic waste which reduces its susceptibility to carbon

 3  decomposition represents a sequestration.  This approach

 4  simply serves to maintain the landfill carbon pool.

 5           We support your staff's recommendation and remain

 6  committed to working with you on cleaner cities, cleaner

 7  fuels, and cleaner fleets.  Thank you.

 8           CHAIRPERSON NICHOLS:  Thank you very much.

 9           Okay.  Greg Knapp and then Chuck White and John

10  Busterud.

11           MR. KNAPP:  Chairman Nichols, member of the

12  Board, thank you for the opportunity to comment.

13           We've been working with staff as well as many

14  others have and think they've done a very good job to date

15  on this important 1990 inventory 2020 goal, which we think

16  can only get better with time.

17           We have heard that the staff would come back to

18  the Board if there are changes to the 1990 inventory that

19  would be significant, which begs the question what's

20  significant.  For example, if it was a difference of three

21  percent, that may not be significant to some folks.  To

22  the cement industry, it would be.  It's more than our

23  entire contribution.

24           So to that end of improving this inventory over

25  the next several years, we would suggest that a mandatory


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           155

 1  annual review and refinement of the 1990 inventory be

 2  required.  And if changes may be less than three percent,

 3  appear that they be brought to the Board for

 4  consideration.

 5           As we move towards 2020 and try to reduce these

 6  emissions and meet our goal, the statewide inventory is

 7  out there.  There may be a tendency to start breaking that

 8  down and looking at sector wide inventories and sector

 9  goals.  We would certainly discourage that, as our sector

10  and many others in the state have undergone considerable

11  capacity increases since 1990 to meet State demands.  And

12  certainly to meet a 1990 level after capacity increases

13  have occurred over 20 or 30 years would be essentially

14  impossible.

15           But with that, I'll conclude.  And thank you for

16  the opportunity.

17           CHAIRPERSON NICHOLS:  Thank you.

18           Chuck White.

19           MR. WHITE:  Thank you, Madam Chair and members of

20  the Board.  Chuck White with Waste Management.

21           There's both good news and bad news with respect

22  to what the inventory says so far.  We are not here to

23  oppose it.  We assume you will go ahead and adopt it.

24           The good news with respect to landfills is

25  they're no longer listed as the larges source of methane


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           156

 1  emissions.  I guess that mantle is now worn by enteric

 2  fermentation.  In fact, the landfills are now shown to be

 3  about -- emissions from landfills are about 65 percent

 4  lower than CCAT which is estimating about two years ago

 5  because the large amount of work the staff has done to

 6  refine the data that was used for the CCAT report.

 7           Even though you don't have the data in front of

 8  you, you see the landfill emissions for 2005 the staff is

 9  estimating are even six percent lower than 1990 emissions.

10  That's in large part because of our improvement's the

11  industry has made to capture landfill gas to hopefully

12  convert as much as we possibly can to renewable energy.

13           Beyond these landfills, the industry has done a

14  tremendous amount in working with the local governments

15  and the State government.  We're at a 50 percent diversion

16  goal, all of which contributes to lower greenhouse gas

17  emissions.  Alternative fuel vehicle also contributes.

18  Energy from waste, and of course landfill gases to petrol.

19           And getting to the maybe bad news but things we

20  want to keep working with you and the staff on is the

21  focus has been solely on landfills, not all the other

22  things that the solid waste industry is doing in terms of

23  composting, recycling waste to energy as well as

24  landfills.

25           We're concerned that the emission inventory


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           157

 1  procedures they're are using here are not consistent with

 2  what U.S. EPA is doing.  I won't bore you with the

 3  details.  EPA uses a stock change approach.  Your staff is

 4  using an atmospheric flow approach.  That has some

 5  limitations about the ability to recognize in your

 6  inventory avoided emissions.

 7           My friend Sean Edgar made reference to landfill

 8  sequestration.  This is partially good news and bad news

 9  from our standpoint.  The staff is recognizing that

10  landfills in fact do have the capability of long-term

11  storage of carbon and thereby reducing emissions that

12  would have otherwise occurred.  You're not including that

13  in your inventory in large part because of your reluctance

14  on this atmospheric floor approach.  Whereas, U.S. EPA

15  uses a stock change approach that does in fact give credit

16  to carbon sequestration and carbon storage in landfills.

17           What we're worried about relying on the

18  atmospheric flow approach is other types of avoided

19  greenhouse gas emissions will similarly not be able to be

20  included.  My friend Sean Edgar likes to talk about

21  composting and carbon storage in soils as a result of

22  composting.  That wouldn't be able to be credited under

23  the atmospheric flow approach.  That would only be able to

24  be credited under the stock change approach.

25           Similarly, credit for recycling or increased


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           158

 1  recycling, which is one of the areas that I know this

 2  state is focusing on, will similarly not be able to be

 3  credited in this approach as well.

 4           So these are issues of good news and bad news.

 5  We're happy for the good news.  We're going to keep

 6  working with you on what we perceive to be the bad news.

 7  We'd like to get the factors that are used to estimate

 8  fugitive emissions from landfills updated.  The staff made

 9  reference to the fact that the some of the data is not

10  scientifically rigorous.  The default data that EPA --

11  they've used and EPA uses is likewise not scientifically

12  rigorous either.

13           So the problem is we need to keep working to come

14  up with the best possible information we can on emissions

15  from landfills and we are committed to doing that.  Thank

16  you.

17           CHAIRPERSON NICHOLS:  Thank you.

18           Mr. Busterud, followed by Eric Little and Taylor

19  Miller.

20           MR. BUSTERUD:  Chair Nichols, members of the

21  Board, it's good to see you again so soon.

22           We acknowledge that estimating the 1990

23  greenhouse gas emissions, coming up with that inventory,

24  is no simple task, especially when it addresses

25  unspecified power imports occurring more than 17 years


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           159

 1  ago.

 2           We do want to acknowledge the hard work staff has

 3  put in on this, and they should be commended for their

 4  efforts.  We support much of staff's work on the baseline

 5  and the CEC's data on which it is based.  But we are among

 6  those in our sector that disagree with some critical

 7  assumptions made concerning greenhouse gas emission's

 8  attributed to unspecified power imports from the northwest

 9  and southwest in 1990.

10           A power expert retained by PG&E, Mr. David Levey

11  of Power Cast, has examined 1990 imports using a widely

12  respected and robust modeling method that was not

13  available in the early 1990s and concluded that the CEC's

14  upon which the staff report is based may be substantially

15  lower than actual 1990 emissions, along the lines of the

16  numbers cited by SCPPA.

17           We believe this analysis suggests emissions

18  estimates for 1990 unspecified power imports would benefit

19  from additional review and that the baseline be adjusted

20  accordingly.

21           PG&E shares the interests of California, its

22  regulated community, and all stakeholders in seeing that

23  the statewide greenhouse gas limit and the base line from

24  which it is derived are based on the best available

25  scientific, technological, and ecologic information as


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           160

 1  required by AB 32.

 2           Staff has stated on several occasions that it

 3  would consider information concerning the 1990 baseline

 4  and 2020 target in the future if such information was

 5  significant and credible.

 6           In this spirit, we ask that the Board and staff

 7  not foreclose further review of the base line and continue

 8  to be receptive to supplemental information and to look

 9  for additional opportunities to discuss this complex issue

10  going forward.  Thank you.

11           CHAIRPERSON NICHOLS:  Thank you.

12           Mr. Little, Mr. Miller, and then Devra Wang.

13           MR. LITTLE:  Good afternoon, Madam Chair and

14  members of the Board.  First, I'd like to discuss a little

15  bit, Chairman Nichols, a comment earlier thanking us for

16  double-siding our comments.  I do have to confess we

17  actually faxed that to you this morning.  So all of the

18  thank you actually goes to, well, you can guess, your

19  wonderful staff here that did it for you.

20           CHAIRPERSON NICHOLS:  Thank you for correcting

21  the record.

22           MR. LITTLE:  Edison does appreciate the efforts

23  of staff and particularly in the power sector assessment.

24           That being said, we do still have some concerns

25  with the consistency between the development of the 1990


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           161

 1  baseline and the protocols to be adopted for reporting of

 2  emissions going forward.

 3           In particular, the staff used a top-down approach

 4  referred to as a fuel input approach to estimate the 1990

 5  emissions.  While the reporting requirements going forward

 6  rely in many instances on in-stack monitoring data.  This

 7  wouldn't be a concern except for the fact that on average

 8  in-stack monitors tend to report emissions approximately 5

 9  percent higher than the fuel input methodology.  Some

10  ability to reconcile these approaches needs to be pursued.

11           Of a different concern are the reductions the

12  staff has recently made to the CEC's original 1990

13  transportation sector GHG estimates.  1990 estimates for

14  highway vehicles were reduced by 9.4 million metric tons

15  of carbon dioxide equivalent, or more than six percent.

16           At the same time, estimates for trains, ships,

17  and planes were reduced by 29 million metric tons of

18  carbon dioxide equivalent, or more than two-thirds of the

19  CED estimate for 1990.  Although we're not experts in the

20  transportation sector, we are concerned over such a

21  reduction since there is a high likelihood that the

22  electric sector would be saddled with share of GHG

23  reduction going forward as a result.

24           By way of background, Edison's GHG emissions

25  today are below our 1990 levels.  As a result, Edison


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           162

 1  believes that part of adopting the 1990 baseline the Board

 2  needs to recognize the need to review the baseline

 3  estimates a year from now to ensure that it is as accurate

 4  as possible.  The staff is recommending that a review

 5  occur if there is significant change.  All that we are

 6  asking for is to suggest that instead of trying to define

 7  what a significant change is, that we just plan to review

 8  this analysis within a year of today's date.

 9           Thank you very much.

10           CHAIRPERSON NICHOLS:  Thank you.

11           Mr. Miller followed by Devra Wang and then Tim

12  O'Connor.

13           MR. MILLER:  Thank you, Madam Chairman and

14  members.  I can be relatively brief, I believe.  I think

15  this is obviously a very daunting task, and staff have

16  done a great job of coming up with the estimates they

17  have.  Mr. Tasat in particular I'd like to commend.  And

18  Larry Hunsaker from our sector did a great job.

19           We are basically in support of the comments

20  you've heard a few minutes ago from Edison and PG&E and

21  SCPPA.  We do have a concern about the accuracy of the

22  1990 emissions estimate for unspecified power.

23           And I think also I'd like to tee up an issue

24  that's related that's also mentioned I believe by the

25  gentleman from Edison, and that is consistency.  We have


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           163

 1  basically three fundamental building blocks to this system

 2  that are under construction.  One is setting the goal, the

 3  inventory.  Another is setting the reductions, which would

 4  be the 2020 projection.  And third is measuring

 5  compliance, which would be the mandatory reporting.

 6           And to return to the GPS analogy that was

 7  mentioned by Mr. Wallerstein earlier, if you're familiar

 8  with GPSs, which I'm not really, there is a datum that has

 9  to be set for each unit.  There are multiple different

10  datums.  If you put one in, you will get a different

11  location than if you put another in.  So the risk is that

12  we would have three different datums, if you will, for

13  these three basic tasks, and each pointing to a different

14  answer as we go forward.

15           But we're thinking is -- it's very difficult to

16  evaluate the significance and indifference of methodology

17  of any one of these three prior to really the conclusion

18  of the scoping plan.  And when we then begin to see how

19  these pieces really fit together and whether there's

20  consequences or not.  In some ways, we're forced to raise

21  issues without understanding completely what they matter.

22           So from that perspective, we think that

23  revisiting this does make sense in the course of scoping.

24  So that concludes my comments.  Thank you very much.

25           CHAIRPERSON NICHOLS:  Thank you for your comment.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           164

 1           Ms. Wang and then Mr. O'Connor, you're our last

 2  witness.

 3           MS. WANG:  Thank you.  Devra Wang again with the

 4  Natural Resources Defense Council.

 5           And we strongly support the staff's proposed 2020

 6  global warming pollution limit of 427 million metric tons

 7  of CO2 equivalent.  I'd like to rejoin the big group hug

 8  and commend the staff again for all of their hard work.

 9  They did a very thorough review of the state's existing

10  greenhouse gas inventories, held a very good public

11  process, and did all this under significant time

12  constraints.  So thank you for all of your hard work.

13           As you know, this pollution limit is a critical

14  foundation for AB 32 as it sets the goal that all of our

15  efforts going forward will be driving towards.  And so we

16  think it's very important that you establish this limit

17  today.

18           As you know, in order to meet the 2020 limit,

19  businesses and sectors across California's economy will

20  need to make long-term investments to reduce emissions.

21  And so certainty is very important to enable those

22  long-term investments.

23           So we urge you to be very clear today as you

24  adopt this 2020 limit that the Board will strive to keep

25  any changes to the limit to the absolute minimum necessary


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           165

 1  in order to provide that certainty.  Similarly, you've

 2  heard suggestions for additional changes today.  As you

 3  know, the California Energy Commission has maintained an

 4  emissions inventory for California for many years.  And

 5  with each reassessment the changes to California's 1990

 6  inventory have been quite small.  And so we urge you to

 7  focus the Board's efforts going forward on reducing

 8  emissions rather than expending further significant staff

 9  effort on trying to refine the data from what happened

10  nearly 20 years ago.  In other words, we urge you to adopt

11  the proposed limit today and stick with it and focus on

12  the future and reducing the pollution.  Thank you.

13           CHAIRPERSON NICHOLS:  Thank you.

14           Mr. O'Connor.

15           MR. O'CONNOR:  Hello again.  Tim O'Connor from

16  Environmental Defense.

17           I'd like to express two points.  One is a strong

18  support for adoption of the 1990 inventory which is before

19  you today.  Setting the 2020 limits is obviously very

20  important.  And we have extensively participated in this

21  process, and we're very comfortable with the level which

22  has been named by the staff.

23           Second, we'd like to express our feelings of

24  importance for a process going forward by which the 1990

25  inventory would be amended.  Currently, there is just sort


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           166

 1  of some questions about, well, if it's adopted by the

 2  Board today, what are the criteria by which we would send

 3  it back a year or when better data comes out in six months

 4  or three years or ten years for amending that 1990 level.

 5  And just some guidance on whether and to what extent that

 6  emission limit can be amended and providing guidance to

 7  the staff as well as some certainty to the regulated

 8  community and to the state of California for the strength

 9  of that number and whether it can move.

10           We think that certainty -- I'd like to sort of

11  just reiterate Devra's comments that certainty is indeed

12  very, very important in this process going forward.  And

13  we'd like to see us moving forward rather than continually

14  looking backward at the 1990 level.  But if indeed there

15  is better data that comes out, we'd like to see a process

16  for which that would be incorporated to make some changes.

17  Thank you very much.

18           CHAIRPERSON NICHOLS:  Thank you for your

19  comments.  That concludes our witness list.

20           Does the staff have any additional comments they

21  wants to make in closing?

22           Hearing none, it comes back to the Board then for

23  further discussion.  And I think we've heard nothing but

24  support for moving forward today.  So I don't feel like

25  there's any real difficulty with that.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           167

 1           The only question I think would be whether there

 2  are additional guidance we want to give to the staff about

 3  what to do in the future.  And I guess I'd like to express

 4  the view that limiting the frequency and the number of

 5  changes that are made to the inventory is a good idea.

 6  That short of some fundamental information that shows that

 7  we were off by more than ten percent in some key area I

 8  don't see the benefit of shifting this number around.

 9  It's an important target.

10           And at some point there could be real money

11  riding on shift of a ton or two.  But it's very likely

12  that any shift in one direction would end up being shifted

13  back in another.  The more work we put into refining those

14  numbers is just the nature I think of these kinds of

15  numbers.

16           So I'm not in favor of an annual thorough going

17  review on this process.  I do think that if new science

18  comes along that really challenges the basis of some of

19  these estimates or calculations, then of course we should

20  be open to that.

21           I also would really like to use the opportunity

22  to say that we are extremely fortunate to be in the

23  position of having the inventory that the CEC has done for

24  us.  It may not be perfect, but the fact that the

25  California Energy Commission saw fit back in 1990 to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           168

 1  actually start doing this kind of inventory work is really

 2  I think one of those things that should be noted in terms

 3  of just how thoughtful California has been in anticipating

 4  what future environmental needs are going to be.  Because

 5  long before AB 32 was even a glean in anybody's eye, they

 6  were thinking about greenhouse gas emissions and the

 7  problem of global warming and trying to be in a position

 8  to be able to do something if the time ever came.

 9           So while undoubtedly their review has made a few

10  little changes along the way, the fact that we have such a

11  robust inventory to work with is really a tremendous

12  blessing as far as I'm concerned.

13           So having expressed my views on this, I hope we

14  can have a motion and a second.

15           BOARD MEMBER D'ADAMO:  Move adoption of

16  Resolution 7-55.

17           SUPERVISOR HILL:  Second.

18           CHAIRPERSON NICHOLS:  Okay.  Very good.  Do we

19  have any further discussion on this one?

20           Hearing none, all in favor say aye.

21           (Aye)

22           CHAIRPERSON NICHOLS:  Any opposed?

23           Carries unanimously.

24           Thank you all for great work.  Ex parte.  I

25  didn't have any so I didn't imagine anybody else did.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           169

 1  It's not a regulation anyway, so we don't have to.  Thank

 2  you for being our conscious.

 3           Before we break for lunch which we should do

 4  momentarily, I have one very pleasant item to add to the

 5  list of this morning -- well, it's sort of a pleasant

 6  item.  It's a recognition of one of our staff so we've

 7  been hearing about all morning here.  But it's not exactly

 8  a happy occasion for us, although it is for him, which is

 9  that we have a resolution commemorating the retirement of

10  our stellar counsel, Tom Jennings.

11           And I'm going to read this resolution, because if

12  it were applicable to anybody else, it would be -- well,

13  it could be of questionable taste actually.  But since it

14  appears to have been drafted by his peers and by people

15  who really like him, I'm assuming that they intended this

16  to have a positive reaction.  So I don't usually read all

17  these whereas's, but I'm going to do it here today.

18           And, Tom, you're going to have to sit there and

19  listen.

20           "Whereas, William Thomas Jennings, otherwise

21  known as Tom, after excelling at foosball at Overland and

22  demonstrating academic excellence at the University of

23  Michigan Law School, has focused his legal career on

24  environmental activism, crowing his 28 years of service at

25  the Air Resources Board by serving as Chief Counsel since


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           170

 1  2005.

 2           "And whereas, Tom began his legend as the

 3  godfather of fuel regulations with the curtailment of led

 4  in gasoline in 1982 and clinched it by tackling the

 5  gargantuan challenge of shepherding the ARB's

 6  precedent-setting low emission vehicle clean fuels program

 7  through the legal obstacle course beginning in 1928 and up

 8  to winning the ZEV waiver in 2005.

 9           "And whereas, without Tom's skill and drafting

10  bullet proof regulations for clean fuels and clean cars,

11  the flanks of lawyers hired by the auto, trucking, and

12  fuel industries would not have earned a fortune in their

13  futile efforts to overturn either set of regulations.

14           "And whereas, Tom's superior intelligence, cool

15  head, respectful manner, and dauntless stamina have

16  resulted in successful settlements of complex matters

17  after heated negotiations with numerous adversaries,

18  including a number of former ARB kingpins" -- that isn't

19  even in quotes.

20           "And whereas, Tom not only talks the talk, he

21  walks the walk, having cycled approximately 105,000

22  commuter miles to work since 1987, sometimes carrying a

23  pair of pruning shears to rid the American River bike

24  trail of hazardous branches.

25           "And whereas, a superb as Tom's analytical skills


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           171

 1  are, he's even better at mountain climbing, as evidenced

 2  by his race to the summit of Sentinel Dome with Mike

 3  Kenney.

 4           "And whereas, in addition to mentoring new

 5  attornies by hearing his expansive legal and institutional

 6  knowledge of ARB's motor vehicle control program, as well

 7  as sharing his wealth of homemade music CDs Tom, continues

 8  to provide critical legal insight as California pursues

 9  cutting edge efforts to regulate greenhouse gases.

10           "And whereas, Tom has made ARB history more

11  accessible by ensuring that his office is a repository of

12  every note, memo, e-mail, and yellow sticky he has

13  produced over the past 28 years."

14           I can attest to that.

15           "Making it a record retention center that rivals

16  the state archives.

17           "And whereas, Tom is retiring from ARB in order

18  to enjoy time with his gifted daughters and engage in his

19  gardening and furniture making and pursue his dreams of

20  traveling in New Zealand, France, and parts unknown with

21  his wife, Betsy, herself an accomplished environmental

22  attorney.

23           "Now, therefore be it resolved, that the Board

24  expresses its deep appreciation to William Thomas Jennings

25  for his many years of dedicated service and wishes him a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           172

 1  long, happy, and productive retirement cheering at the

 2  Tour de France, admiring the wines and vines and other

 3  plants down under, and transferring his legal skills of

 4  infinite patience and painstaking precision to that

 5  relaxing hobby of fine woodworking.

 6           "Be it further resolved, that the Board and the

 7  staff have not had enough of Tom, and the Board applauds

 8  his decision to continue to work for us as a retired

 9  annuitant to assist with ARB's low carbon fuel standard

10  adoption process.

11           "Executed at Sacramento, California, the 6th day

12  of December 2007."

13           Tom, we have a beautiful framed resolution which

14  recites all these wonderful things for you.  And I think

15  we should recess for lunch in your honor and give you this

16  to carry off with you.  We hope you'll display it

17  somewhere very prominently.

18           And if any of the other Board members wants to

19  add a word, they should feel free to.  But as a lawyer who

20  has worked with you over the years -- I was on the Board

21  when you first came to the ARB -- it's my particular

22  pleasure and privilege to be able to present you with

23  this.  Thank you.

24           (Applause)

25           CHIEF COUNSEL JENNINGS:  I'd just like to say a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           173

 1  couple things.

 2           One is I graduated from law school in 1971.  I

 3  have a ridiculously low bar number.  In my first nine

 4  years, I was in four different jobs and kind of kicked

 5  around with a lot of stuff.  And I started working for the

 6  Air Resources Board in January 1980.  And it has been such

 7  a great place to work.  I'm really been glad I've been

 8  able to work for for the 27 years.

 9           And then I wants to say to cap the career for the

10  last two-and-a-half years to work with the executive

11  office.  I think the Executive Officer, the former

12  Executive Officer, the Deputies have been -- it's just

13  been an honor to work with them because they do such

14  extraordinary work.  And I really appreciate that.

15           CHAIRPERSON NICHOLS:  Thank you.  Okay.  We will

16  be back in an hour.  Thanks, everybody.

17           (Thereupon a lunch recess was taken.)

18           CHAIRPERSON NICHOLS:  We can get started, please.

19  We did just a great job this morning we decided to

20  continue.

21           The next item on the agenda is a proposal to

22  adopt gaseous pollutant measurement allowances for

23  California's heavy-duty diesel in-use compliance

24  regulation.  And these proposed allowance were developed

25  in a research test program jointly funded by ARB the U.S.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           174

 1  EPA and the engine manufacturers.

 2           Today staff will present to the Board a summary

 3  of the research test program and the measurement

 4  allowances determined under this program for the Board's

 5  approval.  Mr. Goldstene.

 6           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

 7  Nichols.

 8           Health and Safety Code Section 43104 directs the

 9  Air Resources Board to adopt test procedures to ensure

10  compliance with emissions standards for engines used in

11  heavy-duty motor vehicles.

12           In 2006, the Board adopted new heavy-duty diesel

13  in-use compliance regulations and test procedures known as

14  the manufacturer-run heavy-duty diesel in-use testing

15  program.  Testing under this program will be conducted by

16  the engine manufacturers with portable emission

17  measurement systems.

18           Prior to adoption of the heavy-duty diesel in-use

19  compliance regulation, the Air Resources Board,

20  United States Environmental Protection Agency, and the

21  engine manufacturers agreed to fund a research test

22  program to determine appropriate measurement allowances

23  for each gaseous pollutant.  Those allowances would

24  account for any potential difference in measurement

25  accuracy between measurements made with portable emission


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           175

 1  measurement systems in the field and laboratory grade

 2  analyzers in the laboratory.

 3           The research test program conducted by the

 4  Southwest Research Institute has been completed and ARB,

 5  U.S. EPA, and the engine manufacturers have agreed on the

 6  appropriate measurement allowances.

 7           The proposed measurement allowances are more

 8  stringent than those originally adopted and would provide

 9  for a more effective in-use compliance program in

10  California.

11           I'd like to turn the presentation now over to

12  Dipak Bishnu of the Mobile Source Control Division who

13  will provide an overview of staff's findings and present

14  recommendations.

15           CHAIRPERSON NICHOLS:  Thank you.

16           (Thereupon an overhead presentation was

17           presented as follows.)

18           AIR RESOURCES ENGINEER BISHNU:  Thank you, Mr.

19  Goldstene.  Good afternoon Chairman Nichols and members of

20  the Board.

21           Today's presentation will summarize staff's

22  proposal for gaseous pollutants measurement allowances for

23  California's heavy-duty diesel in-use compliance

24  regulation.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           176

 1           AIR RESOURCES ENGINEER BISHNU:  In September

 2  2006, ARB adopted new in-use compliance regulations and

 3  test procedures applicable to on-road heavy-duty trucks.

 4  Prior to the adoption of this rule, determining compliance

 5  for heavy-duty trucks required that ARB remove the engine

 6  from at least ten trucks and then install the engine on an

 7  engine dynamometer for emission testing.  Because this is

 8  a very costly and time-consuming procedure, ARB has never

 9  conducted compliance testing for on-road heavy-duty

10  trucks.

11           The recently adopted regulation established a

12  manufacturer-run heavy-duty diesel in-use testing program

13  that requires manufacturers to emission test a set number

14  of their certified engine families each year.  Compliance

15  would be based on whether the trucks meet in-use emission

16  limits under normal, on-road driving conditions.  The

17  actual testing would be performed using portable emission

18  measurement systems, or PEMS, installed on in-use trucks.

19           Since PEMS are a relatively new technology, their

20  measurement variability under in-use conditions needed to

21  be determined before they could be used to determine

22  compliance with emission standards.

23                            --o0o--

24           AIR RESOURCES ENGINEER BISHNU:  This chart

25  illustrates how compliance based on in-use testing is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           177

 1  determined and the significance of the measurement

 2  variability allowance.

 3           If we could test an engine in our lab, compliance

 4  would be determined by comparing tested emissions to the

 5  certification emission standard.  However, this is not

 6  practical.

 7           By using PEMS, emissions can be measured on road

 8  and the results can be compared to the on-road emission

 9  standard, called the not to exceed, or NTE standard.

10           Because this program is new and these are in-use

11  vehicles, an allowance for mileage accrual is added.

12           Finally, an allowance to reflect the greater

13  variability of measurements obtained on road is added.

14  This is the factor we are proposing you adopt today.

15           Based on the manufacturers in-use testing of

16  trucks, in a specific engine model has emissions higher

17  than shown by this bar, remedial action to lower emissions

18  will be required.

19                            --o0o--

20           AIR RESOURCES ENGINEER BISHNU:  Testing conducted

21  in the past few years has shown that PEMS technologies

22  have performed well and can accurately measure gaseous

23  emissions from heavy-duty diesel trucks under a variety of

24  driving conditions.  PEMS emission analyzers used for

25  measuring gaseous pollutants are compact versions of the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           178

 1  same technologies used in laboratories.  They can be

 2  easily mounted to a truck chassis as shown here.

 3           Because testing will be conducted on the road,

 4  instead of in an environmentally controlled laboratory,

 5  PEMS have greater test to test variability due to

 6  environmental factors such as temperature, altitude, and

 7  vibration.  A measurement allowance accounts for this

 8  variability and assures a complying truck will not be

 9  erroneously determined to be non-complying.

10                            --o0o--

11           AIR RESOURCES ENGINEER BISHNU:  Measurement

12  allowances for each regulated pollutant are needed before

13  implementing the in-use compliance program.  In May 2005,

14  a Measurement Allowance Steering Committee was formed to

15  develop the measurement allowances.  The Southwest

16  Research Institute in San Antonio, Texas, was contracted

17  to perform testing to develop the measurement allowances.

18                            --o0o--

19           AIR RESOURCES ENGINEER BISHNU:  The testing

20  program was multi-faceted and complex with specific steps

21  and goals.  A key element of the program involved the

22  selection and use of a comprehensive and rigorous

23  statistical model.  To calculate the appropriate

24  measurement allowances, different potential sources of

25  error were evaluated.  This was done by collecting


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           179

 1  emission data on a number of engines on an engine

 2  dynamometer, in parallel with PEMS, to determine PEMS

 3  measurement error.

 4           Also, environmental chamber tests were conducted

 5  to expose the PEMS to a variety of environmental factors,

 6  namely electromagnetic interference, atmospheric pressure,

 7  temperature, humidity, vibration, and ambient hydrocarbon

 8  levels.

 9           There were three acceptable emission calculation

10  methods used in the statistical model, yielding three

11  different sets of measurement allowances.  The measurement

12  allowances were then validated under new real world

13  conditions using a tractor trailer equipped with

14  laboratory grade instruments.

15                            --o0o--

16           AIR RESOURCES ENGINEER BISHNU:  Here are the

17  proposed measurement allowances.  The 2007 through 2009

18  model year allowances shown in the middle column were

19  based on preliminary validation work and thus reflect more

20  uncertainty and a bigger allowance.  They apply only to

21  the first three model years.  Completion of the testing

22  program including validation resulted in smaller

23  measurement allowances that will apply in 2010 and

24  subsequent model year engines.

25           The smaller allowances result in a more stringent


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           180

 1  in-use compliance program that has a greater chance of

 2  identifying high emitting models that may be recalled to

 3  replace poorly designed components.  These are shown in

 4  the right hand column.

 5                            --o0o--

 6           AIR RESOURCES ENGINEER BISHNU:  Staff's original

 7  proposal included an amendment that would adopt the

 8  measurement allowances that I just discussed.  However,

 9  subsequent to the release of our hearing notice, the

10  United States Environmental Protection Agency stated their

11  intent to adopt relatively minor technical amendments to

12  the testing protocol.  In the spirit of harmonization,

13  staff proposes to incorporate these amendments into our

14  test procedures.

15           Another proposed amendment would include the

16  combined NOx plus NMHC measurement allowance for 2007

17  through 2009 model year engines.

18           Finally, the 15-day notice would incorporate the

19  proposed measurement allowances in a more appropriate

20  section of the regulation as compared to their location in

21  the staff's original proposal.

22                            --o0o--

23           AIR RESOURCES ENGINEER BISHNU:  Gaseous

24  measurement allowances are necessary to account for

25  variability and to allow the in-use compliance program to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           181

 1  be fully implemented.  The allowances for 2010 and beyond

 2  are small and will assure that high emitting trucks are

 3  properly identified for remedial action.  Staff recommends

 4  adoption of these allowances with 15-day changes.

 5           We will be returning to you once a similar

 6  process, now underway, produces allowances for PM

 7  emissions.

 8           Thank you.  This concludes my presentation.

 9           CHAIRPERSON NICHOLS:  Thank you very much.  I'm

10  impressed that you managed to get through this whole

11  process without generating a single comment.  No one has

12  signed up to comment on this issue.  Obviously, it's a

13  technical and somewhat difficult issue.

14           But as I understand it -- I just want to be clear

15  about this.  And I'm not sure whether I should ask you the

16  question or someone else.  It seems as though this will

17  now enable us to run some form of I&M program for

18  heavy-duty on-road vehicles; is that correct?

19           MANAGER LEMIEUX:  Not exactly.  It's not designed

20  so we can implement an I&M per se program as we know I&M

21  today for light duty.  This will enable able us to do

22  actual in-use compliance --

23           CHAIRPERSON NICHOLS:  But it would be testing

24  that will allow you to test real world trucks in real

25  conditions.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           182

 1           MANAGER LEMIEUX:  Correct.  Under the normal

 2  driving condition.

 3           CHAIRPERSON NICHOLS:  Good.  That's important for

 4  all kinds of reasons.  So I thank you for that.

 5           I'm going to close the item on this item since

 6  there are no comment.

 7           Do the Board members have any questions or

 8  comments to add?

 9           SUPERVISOR HILL:  Move the Resolution.

10           BOARD MEMBER RIORDAN:  Second.

11           CHAIRPERSON NICHOLS:  All in favor say aye.

12           (Ayes)

13           CHAIRPERSON NICHOLS:  Any opposed?

14           Thank you and congratulations.

15           BOARD MEMBER RIORDAN:  A bit of the truth is,

16  Madam Chairman, that they've worked on this long and hard.

17  And I think over a period of time really resolved all the

18  extraneous issues.

19           CHAIRPERSON NICHOLS:  I'm sure that's right.

20           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Perhaps we

21  can do the next item by consent also.

22           CHAIRPERSON NICHOLS:  Nice try.

23           The next item is one of our major issues for this

24  meeting and for the year, for that matter.  And that's the

25  proposed regulation dealing with oceangoing vessels that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           183

 1  will apply while they're at berth at ports in California.

 2           This is a measure that's designed to dramatically

 3  reuse exposure to neighborhoods near these ports to

 4  particulate matter and also reduce the impact of

 5  port-related emissions on regional levels of particulate

 6  and ozone.  And it also will help ARB in achieving

 7  greenhouse gas reduction goals under AB 32.

 8           So it has major important benefits that are at

 9  stake here.  But it is also a new area for us to be moving

10  into.  And staff has worked hard to bring this to us in

11  the situation where it has the greatest possible degree of

12  support, but I'm sure not everyone is going to be

13  100 percent unanimous.

14           So with that, look forward to the staff

15  presentation.

16           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

17  Nichols.

18           Today, we're proposing a regulation that will

19  significantly reduce emissions from oceangoing vessels

20  while docked at California ports.  As you know, these

21  ports are often located adjacent to densely populated

22  areas.  Because of the high concentrations of diesel

23  engines, residents are exposed to unhealthy levels of

24  pollutants.

25           In 2004, staff completed an exposure assessment


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           184

 1  for the ports of Los Angeles and Long Beach that revealed

 2  that the emissions from docked ships or hoteling

 3  emissions, as they're often referred to, impact the very

 4  large area and result in elevated potential cancer risks,

 5  premature mortality, and other adverse health effects.

 6           Last year, the Board approved the Goods Movement

 7  Emission Reduction Plan.  In that plan, we identified a

 8  variety of measures aimed at reducing emissions from goods

 9  moving via the state's highways, railways, and ports.  One

10  of the measures was aimed at reducing hoteling emissions

11  by requiring ships to shut off diesel auxiliary while at

12  dock with the exception they could connect to much cleaner

13  shore-based electricity sources.  This is sometimes

14  referred to as shore power or cold ironing.

15           As you'll see in the staff's presentation, we

16  developed a proposal to implement this concept.  The

17  proposed regulation would reduce the public's exposure to

18  diesel PM emissions and the resultant cancer and other

19  health impacts.  In addition, the regulation will

20  contribute to improvements in regional air quality by

21  reducing precursors to ozone and PM.  These reductions

22  will help the South Coast basin meet the 2014 deadline for

23  PM2.5 attainment as well as its future ozone attainment

24  deadlines.

25           In addition, the regulation will have a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           185

 1  co-benefit of reducing the emissions of carbon dioxide.

 2  In October, you approved an expanded list of early action

 3  measures to reduce greenhouse gas emissions in California.

 4  The green ports measure, or port electrification as it was

 5  previously described, was reclassified on this list as a

 6  discrete early action measure for reducing greenhouse

 7  gases.  The regulation before you today will result in

 8  significant reductions in carbon dioxide emissions which

 9  will assist the state in meeting its 2020 greenhouse gas

10  emissions reduction goal.

11           Last year, the state's voters approved a one

12  billion dollar bond to provide incentive funds for cleaner

13  equipment and technologies associated with freight

14  movement.  We have proposed some of these bond funds

15  should be used in concert with that proposal today in

16  order to accelerate the reductions attained with this

17  regulation.

18           Next month, staff will bring proposed guidelines

19  to the Board to implement the Goods Movement Bond Program.

20           I'd like now to have Mr. Grant Chin of our

21  Stationary Source Division present the staff's proposal.

22  Grant.

23           (Thereupon an overhead presentation was

24           presented as follows.)

25           AIR RESOURCES ENGINEER CHIN:  Thank you, Mr.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           186

 1  Goldstene.  Good afternoon, Madam Chairman and members of

 2  the Board.

 3           Today, I will be presenting staff's proposed

 4  regulation for reducing emissions from oceangoing ships

 5  while at berth at California ports.

 6                            --o0o--

 7           AIR RESOURCES ENGINEER CHIN:  This slide presents

 8  the topics I will be discussing.

 9                            --o0o--

10           AIR RESOURCES ENGINEER CHIN:  First, I will

11  provide background information.

12                            --o0o--

13           AIR RESOURCES ENGINEER CHIN:  While docked, ships

14  run large diesel auxiliary engines to meet their on-board

15  electrical needs such as lighting, ventilation, pumps,

16  communication, and refrigeration.

17           The power requirements are specific to ship

18  category and types of cargo carried and vary from about

19  one megawatt to as much as 15 megawatts.

20           Another term for a ship at dock is to say that it

21  is hoteling, which is a term I will use in this

22  presentation.

23           This proposal has been described as port

24  electrification in the Goods Movement Emission Reduction

25  Plan and as green ports in the Early Action Measures to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           187

 1  reduce greenhouse gas emissions.

 2                            --o0o--

 3           AIR RESOURCES ENGINEER CHIN:  Hoteling emissions

 4  occur for extended periods at near shore locations and

 5  contribute to regional PM2.5 ambient air quality levels

 6  and health impacts to population near ports.  Based upon

 7  the health risk assessment for the ports of Long Beach and

 8  Los Angeles, the impacts of hoteling emissions on

 9  communities are significant.

10           The potential cancer risks shown are based on

11  hoteling emissions for 2006.  Since the implementation of

12  the auxiliary engine fuel regulation in January 2007,

13  emissions and risks have been reduced by about 65 percent.

14  This rule would reduce these levels further.

15                            --o0o--

16           AIR RESOURCES ENGINEER CHIN:  These impacts

17  include increased cancer and non-cancer risks including

18  premature death and adverse respiratory effects.

19                            --o0o--

20           AIR RESOURCES ENGINEER CHIN:  Reducing hoteling

21  emissions is necessary for several reasons.

22           First, the measure is needed to help achieve an

23  85 percent reduction of diesel PM by 2020 as stated in the

24  2000 Diesel Risk Reduction Plan.  This proposed regulation

25  working with the auxiliary engine fuel regulation adopted


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           188

 1  in 2005 meets that goal.

 2           Second, the measure will meet the stated 2015 and

 3  2020 goals for hoteling in the 2006 Goods Movement

 4  Emission Reduction Plan.

 5           Next, the measure will help achieve both direct

 6  PM and oxides of nitrogen reduction needed to help meet

 7  the South Coast Air Basin's State Implementation Plan

 8  requirements for PM2.5 and ozone.  This proposed

 9  regulation is essential to provide the Board's

10  contribution to these reductions.

11           Finally, this measure is necessary to deliver

12  greenhouse gas emission reductions as a discreet early

13  action measure identified by the Board last October.

14                            --o0o--

15           AIR RESOURCES ENGINEER CHIN:  In the early 2005,

16  staff began investigating hoteling emissions and the use

17  of shore power.  We published a draft evaluation report in

18  March of 2006.  The report showed that shore power could

19  be a cost effective measure in many instances.  Therefore,

20  staff began to develop a proposed regulation.

21                            --o0o--

22           AIR RESOURCES ENGINEER CHIN:  I would now like to

23  discuss in more detail the ships that visit California

24  ports and those that would be affected by the proposed

25  regulation.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           189

 1           In 2006, about 2000 ships made over 10,000 visits

 2  to California ports.  About 70 percent of these visits

 3  were made to the ports of Long Beach, Los Angeles, and

 4  Oakland.  The ports of Los Angeles and Long Beach comprise

 5  the busiest container port complex in the nation and the

 6  fifth busiest in the world.  The port of Oakland is the

 7  fourth busiest container port in the nation.

 8                            --o0o--

 9           AIR RESOURCES ENGINEER CHIN:  This slide lists

10  the seven major categories for oceangoing ships.  The

11  focus of the regulation today is on the first three

12  categories listed:  Container ships, passenger ships, and

13  refrigerated cargo shipped called reefer ships.

14                            --o0o--

15           AIR RESOURCES ENGINEER CHIN:  This slide shows

16  the relative percentage of visits made by each ship

17  category for the 10,000 visits California ports received

18  in 2006.  The containers ships are the largest category

19  and represent 45 percent of the total visits.

20                            --o0o--

21           AIR RESOURCES ENGINEER CHIN:  However, when

22  considering the relative emissions from the various ship

23  categories, the container ship category dominated

24  accounting for two-thirds of the NOx emissions.  Passenger

25  ships, with only seven percent of the visits, represent 13


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           190

 1  percent of the emissions.  Together, the three categories

 2  of ships considered in this rulemaking comprise about 85

 3  percent of the NOx emissions from hoteling with a similar

 4  breakdown for diesel PM.

 5                            --o0o--

 6           AIR RESOURCES ENGINEER CHIN:  This chart shows

 7  that without the proposed regulation in place, hoteling

 8  NOx emissions will increase through 2020, and the relative

 9  contribution of the container ships and passenger ships

10  will account for most of that increase.

11           Staff estimates that in 2020 these two ship

12  categories would emit 85 percent of the total hoteling

13  emissions.  The emission trends for PM over this period

14  would be similar.

15                            --o0o--

16           AIR RESOURCES ENGINEER CHIN:  The next three

17  slides provide more detail regarding the ship categories

18  affected by the proposal.

19           As mentioned earlier, the emissions from

20  container ships at dock represent nearly two-thirds of the

21  total emissions from all ship categories.

22           The power needs of a container ship at dock

23  depends upon the number of refrigerated containers on

24  board.  This will vary over the year.  A typical load is

25  about 1.5 megawatts, but for a voyage where the ship is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           191

 1  carrying the maximum number of refrigerated container, the

 2  power requirements for refrigeration would be about seven

 3  megawatts.

 4                            --o0o--

 5           AIR RESOURCES ENGINEER CHIN:  Passenger ships

 6  represent a much smaller percentage of the total visits to

 7  California ports.  Although they have short berthing

 8  times, the high power requirements result in significant

 9  hoteling emissions.

10                            --o0o--

11           AIR RESOURCES ENGINEER CHIN:  The last ship

12  category covered by the proposed regulation is

13  refrigerated cargo ships or reefers.  These type of ships

14  bring fresh produce such as bananas to the west coast.

15           This category represents only about three percent

16  of the total ship visits and four percent of the total

17  at-berth emissions, but they are good candidates for shore

18  power because of their long berthing times, high power

19  requirements, and frequency of visits.

20                            --o0o--

21           AIR RESOURCES ENGINEER CHIN:  Staff will

22  continues to evaluate the other ship categories and

23  develop a proposal to reduce hoteling emissions from these

24  categories as well as tugboats.  Staff expects to bring

25  these measures to the Board in the late 2006.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           192

 1                            --o0o--

 2           AIR RESOURCES ENGINEER CHIN:  I will now discuss

 3  the requirements of the proposed regulation.

 4                            --o0o--

 5           AIR RESOURCES ENGINEER CHIN:  I meant 2008.

 6  Sorry about that.

 7           The proposal was designed the maximize cost

 8  effective reductions of diesel PM and NOx hoteling

 9  emissions.  The proposal also seeks reductions on the most

10  expeditious schedule possible.  Implementation of these

11  requirements will also result in a significant reduction

12  of CO2, a greenhouse gas.

13           The proposal affects the ship categories most

14  suitable for shore power:  Container ships, passenger

15  ships, and reefer ships.

16           The proposal will require ship fleets that make

17  more than 25 visits to a port to reduce emissions of PM

18  and NOx by at least 80 percent by 2020.  The proposal

19  reduces hoteling emissions by reducing the use of the

20  ship's auxiliary engines by the ship is docked.

21           While the proposal does not specify that grid

22  based power must be used, staff expects that this will be

23  the primary compliance option.  Additionally, the proposal

24  allows the use of other alternatives that achieve the same

25  level of reduction as those expected to be achieved with


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           193

 1  grid-based power.  These alternatives include the use of

 2  distributed generation, or DG, or the use of emission

 3  control techniques either on the ship or located at the

 4  terminal.

 5           Finally, the schedules have been designed based

 6  on the time needed to fully implement the selected

 7  technology and to require all ships to use shore power if

 8  available.

 9                            --o0o--

10           AIR RESOURCES ENGINEER CHIN:  The proposal

11  affects 31 terminals that operate at the six ports.  Each

12  of these terminals operates independently from one another

13  and in most cases independently from the port authority.

14  Of the 31 terminals affected, 25 are container ship

15  terminals, four are passenger ship terminals, and two are

16  reefer terminals.  Seventeen of the terminals, over half,

17  will be at the ports of Long Beach and Los Angeles.

18                            --o0o--

19           AIR RESOURCES ENGINEER CHIN:  Each terminal will

20  have one to four berths that will need to have shore power

21  equipment added to the berth.  This slide shows the total

22  berths affected by the proposal for each port.

23                            --o0o--

24           AIR RESOURCES ENGINEER CHIN:  The proposal

25  requires substantial efforts by the terminal operators and


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           194

 1  ship operators.  The slide shows the major commitment that

 2  will need to be made by both the terminals and ship

 3  operators, based on the ship visit criteria in the

 4  proposal.

 5           Thirty-one terminals at six ports will be

 6  affected.  We expect these terminals will add grid-based

 7  power equipment are other equivalent controls to an

 8  estimated 44 berths by 2014 and to an additional 32 berths

 9  by 2020.  Similarly, for the ship operators, we expect

10  about 300 ships to be equipped to satisfy the 2014 goal

11  and an additional 450 ships by 2020.

12           Ships are periodically redeployed to other

13  routes.  As this occurs, the replacement ships must also

14  be equipped to except shore power.  Staff estimates

15  another 700 containers ship could need to be equipped due

16  to redeployment.

17                            --o0o--

18           AIR RESOURCES ENGINEER CHIN:  Substantial capital

19  investment will be necessary to provide the power to those

20  vessel operators that want to plug in.  Using grid-based

21  power requires substantial modification to terminal

22  infrastructure including modifying the electrical system

23  at an operating facility.  These modifications will take

24  longer if additional power needs to be brought to the port

25  in general.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           195

 1           The complexity of these modifications will vary

 2  from terminal to terminal.  Additionally, the requirements

 3  of the California Environmental Quality Act also need to

 4  be satisfied.  Overall, staff believes it will take up to

 5  five years before all 31 of the affected terminals could

 6  be equipped to use grid-based power.

 7           Grid-based shore power is a proven technology.

 8  The U.S. Navy has been employing shore power for decades

 9  around the world.  Passenger ships in Juneau, Alaska and

10  Seattle use shore power, as do a couple of container

11  berths at the port of Los Angeles.

12           Based on our discussions with port staff, the

13  ports of Long Beach, Los Angeles, San Diego, and

14  San Francisco plan to primarily satisfy the requirements

15  of the proposal with a grid-based approach.  These four

16  ports are pursuing grid-based shore power because the

17  utility grid is reliable, can handle the full range of

18  electrical requirements for various ships, and is a proven

19  technology.  Once it is constructed, it is easy to

20  implement and maximizes emission reductions at the port.

21                            --o0o--

22           AIR RESOURCES ENGINEER CHIN:  Grid-based shore

23  power applications are currently planned in California.

24  Late last year, the ports of Los Angeles and Long Beach

25  jointly approved their Clean Air Action Plan.  The plan


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           196

 1  includes a commitment to modify 22 container and passenger

 2  ship berths, 15 of them existing berths, and establish a

 3  timetable to use grid-based power for 1,000 visits by mid

 4  2011.

 5           Today, China Shipping and NYK operate two berths

 6  for container ships using shower power or alternative

 7  maritime power, AMP, as referred to by the port of Los

 8  Angeles.  By the end of the next year, grid-based power

 9  will be used for to more container berths, a tanker

10  terminal, and two berths at a cruise terminal at the two

11  ports.

12                            --o0o--

13           AIR RESOURCES ENGINEER CHIN:  The proposed

14  regulation offers the flexibility of using alternative

15  methods of compliance instead of grid-based power.  Under

16  the proposed emission reduction implementation schedule,

17  the ship operators and terminals use individual methods or

18  a combination of shore power or power from DG technology

19  or emission control techniques such as different fuels and

20  post-combustion emission controls.

21           At this time, many of the potential alternative

22  methods of compliance have been demonstrated in concept,

23  but have not been applied to marine applications

24  commercially.  For example, the DG concept has been

25  demonstrated during a single visit of a container ship and


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           197

 1  under partial load conditions.  Using DG power can

 2  potentially reduce hoteling emissions by 85 percent,

 3  assuming all the ships electrical needs can be satisfied

 4  and the connection is quickly achieved.

 5           Additionally, some ship operators are exploring

 6  on-board methods.  For example, a demonstration using

 7  emulsified fuel is nearly complete, which can reduce NOx

 8  emissions up to 20 percent and PM emissions up to 70

 9  percent.

10                            --o0o--

11           AIR RESOURCES ENGINEER CHIN:  For terminals using

12  DG systems, the proposal contains minimum NOx and CO2

13  emissions standards applicable for these systems.

14           Prior to 2014, the initial NOx standard allows

15  the use of a relatively clean IC engine without add-on

16  emission controls.  After 2014, when the requirement for

17  grid based systems becomes effective, any shore technology

18  will be required to satisfy emission standards consistent

19  with the implementation of best available control

20  technology.  The resulting emissions will be closer to the

21  emissions from the utility providing grid power.

22           To ensure greenhouse gas benefits, the proposal

23  requires CO2 emissions be no greater than the CO2

24  emissions from any of the utilities natural gas fueled

25  power plants.  We believe that in most cases the utility


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           198

 1  will use natural gas fueled power plants to provide the

 2  power for these ships.

 3                            --o0o--

 4           AIR RESOURCES ENGINEER CHIN:  Similarly, there

 5  are significant CO2 emission reductions using shore power.

 6  The proposed regulation would cap CO2 emissions from DG

 7  equipment at the same level recommended by the Public

 8  Utilities Commission and the Energy Commission for

 9  unspecified sources of power, a combined cycle gas turbine

10  producing 500 grams per kilowatt hour.

11           Actual CO2 emissions to create the electricity

12  needed for shore power are likely close to the emissions

13  from marginal grid electricity.  According to the grid

14  analysis by the Climate Action Team, this is best

15  represented by a modern combined cycle gas turbine but

16  with 20 percent renewables in the mix.

17           In any case, the use of shore power will maximize

18  the potential for CO2 emission reductions.  The grid has a

19  smaller carbon footprint than most technologies used for

20  DG.  In addition, as AB 32 measure require the cleanup of

21  California's grid, the greenhouse gas benefits of

22  grid-based shore power will be more pronounced.

23                            --o0o--

24           AIR RESOURCES ENGINEER CHIN:  Based on public

25  comments and staff's own evaluation, we are proposing a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           199

 1  revised implementation schedule.  The schedule is simpler

 2  than the original proposal, consisting of two compliance

 3  options, a grid-based power option, and an emissions

 4  reduction that is technology neutral.

 5           The compliance time lines are consistent with the

 6  ability to deploy the technologies.  Both options are

 7  required to achieve 50 percent reduction and 80 percent

 8  reduction in 2014 and 2020 respectively.

 9           We have added a 70 percent reduction requirement

10  in 2017 to assure reasonable progress toward the 2020

11  goal.  And we have also provided flexibility in the early

12  years for alternative technologies that achieve early

13  emission reductions.

14                            --o0o--

15           AIR RESOURCES ENGINEER CHIN:  To provide

16  incentives for early emission reductions, staff proposes

17  to allow some time averaging under the emission

18  performance option.  Reductions achieved early than or in

19  excess of the 2010 requirement can be used toward meeting

20  the 2012 or 2017 requirements.

21           Similarly, reductions achieved in excess of

22  either the 2010 or the 2012 requirement can be used toward

23  meeting the 2017 requirement.  This allows those ship

24  fleets achieving early emission reductions some greater

25  flexibility with later requirements.  Never the less, the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           200

 1  2014 and 2020 performance requirements must be met under

 2  either option and serve as a floor for the required

 3  emission reductions and ensure full benefits are delivered

 4  by these two keys milestone years.

 5           There was some concern expressed about switching

 6  from the grid-based option to the emission reduction

 7  option, thereby circumventing the earlier interim

 8  performance targets.  Staff proposes that such a switch

 9  would only be allowed if the fleet operator were meeting

10  the current interim target immediately.

11                            --o0o--

12           AIR RESOURCES ENGINEER CHIN:  Here's the revised

13  schedule.  The proposal requires that all ships must use

14  shore power if they are equipped to do so and it is

15  available at the berths.

16           So emission reductions will occur with the grid

17  perfect power option before 2014.

18           Both options must achieve 50 percent reductions

19  in 2014 and 80 percent reductions in 2020.  In addition,

20  the emissions reduction option has two earlier performance

21  standards in 2010 and 2012.  These will assure that

22  emission reduction techniques that can be deployed in an

23  earlier time frame will be deployed.

24                            --o0o--

25           AIR RESOURCES ENGINEER CHIN:  The proposal


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           201

 1  requires by July of 2009 terminal operators to submit

 2  plans declaring the types of shore side infrastructure

 3  that will be installed based upon the compliance options

 4  chosen by the fleets visiting that terminal.

 5           These plans will require the coordination of the

 6  ship operators, the terminal operators, the ports, and the

 7  local utility companies.  Staff is confident that this

 8  level of coordination will occur, that the necessary and

 9  required emission reductions will be achieved in a timely

10  and cost effective manner.

11           The terminals are also required to provide follow

12  up reports to the Executive Officer indicating that

13  progress toward implementing the plan to install

14  infrastructure.  Similar planning and reporting

15  requirements are applicable to the ship fleets.

16                            --o0o--

17           AIR RESOURCES ENGINEER CHIN:  I will now discuss

18  the air quality benefits associated with the proposal.

19                            --o0o--

20           AIR RESOURCES ENGINEER CHIN:  This slide shows

21  the estimate emission reductions achieved by the proposal

22  for the years 2014 and 2020.  These reductions assume that

23  the emission reductions are the result of power being

24  provided by the grid.  Staff believes that power will be

25  likely provided combined cycle power plants.  A range is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           202

 1  given for CO2 reductions from these plants based on the

 2  different estimates provided by the PUC and the Climate

 3  Action Team as discussed earlier.

 4           In summary, the proposal will yield substantial

 5  reductions in NOx, PM, and CO2.

 6                            --o0o--

 7           AIR RESOURCES ENGINEER CHIN:  This slide shows

 8  the NOx emissions from the three ship categories:

 9  Container, passenger, and reefer ships.  These emissions

10  are more than 80 percent of the total hoteling emissions

11  from all ship categories, include the impact from

12  implementing the auxiliary engine fuel regulation.

13  Because the expected growth in goods movement and the

14  cruise industry, NOx emissions could double between 2006

15  and 2020 without mitigation measures.

16                            --o0o--

17           AIR RESOURCES ENGINEER CHIN:  This chart

18  illustrates the substantial NOx emissions reductions

19  achieved by the proposal reducing emission despite

20  substantial growth in port activity.  The early reductions

21  starting in 2009 are mainly from the implementation of the

22  San Pedro Bay Ports Clean Air Action Plan.

23           As I mentioned previously, the two ports hope to

24  use grid-based power for 1,000 visits by mid 2011.  This

25  level is half of the visits necessary to achieve the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           203

 1  50 percent reduction 2014 goal from each of the affected

 2  fleets at the ports of Long Beach and Los Angeles.

 3                            --o0o--

 4           AIR RESOURCES ENGINEER CHIN:  This slide shows

 5  the diesel PM emissions for the same ship categories.  As

 6  you can see, the implementation of the auxiliary engine

 7  regulation, which was adopted by the Board in 2005, will

 8  reduce diesel PM emissions every year until 2010 when the

 9  auxiliary engine regulation will be fully implemented.

10  Again, the expected growth in goods movement and cruise

11  activity could increase the diesel PM emission from 2010

12  levels to about 70 percent by 2020 without further

13  mitigation.

14                            --o0o--

15           AIR RESOURCES ENGINEER CHIN:  This chart shows

16  the reductions in diesel PM resulting from the proposal.

17  Similar to the previous chart, the top line represents the

18  base emissions from the three ship categories reflecting

19  the auxiliary engine regulation.  The proposal would

20  prevent any emission increases resulting from the growth

21  in goods movement and cruise activity and further reduce

22  emissions by about 75 percent.  Overall, the two rules

23  result in a 95 percent decrease, despite tremendous growth

24  in the number of containers handled.

25                            --o0o--


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           204

 1           AIR RESOURCES ENGINEER CHIN:  In the Clean Air

 2  Action Plan, both San Pedro bay ports anticipate adding

 3  shore power equipment to 22 berths by mid 2011,

 4  accommodating 1,000 ship visits.

 5           The proposed regulation meshes with the Clean Air

 6  Action Plan but goes well beyond it.  To meet the

 7  requirements of the proposed regulation, the ports of Long

 8  Beach and Los Angeles will have to double the number of

 9  ships visits using shore power in 2014, thirty months

10  after the current Clean Air Action Plan commitments.

11           They more than double ship visits again to meet

12  the 2020 emission reduction goals.  An additional 20

13  berths would need to be equipped with shore power

14  capability.  Staff believes that this is an aggressive but

15  achievable goal.

16                            --o0o--

17           AIR RESOURCES ENGINEER CHIN:  By significantly

18  reducing the diesel PM and NOx at-berth emissions, the

19  proposal will provide significant health benefits.  Staff

20  has evaluated the impact of the proposal on the

21  near-source cancer risk for the ports of Los Beach and Los

22  Angeles and have determined that the proposal would

23  significantly reduce-near source cancer risk near these

24  ports.  Staff believes similar benefits would occur at the

25  other ports affected by this proposal.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           205

 1                            --o0o--

 2           AIR RESOURCES ENGINEER CHIN:  The other health

 3  benefits shown in the slide are the cumulative benefits

 4  achieved over the years 2009 through 2020.

 5                            --o0o--

 6           AIR RESOURCES ENGINEER CHIN:  I will now discuss

 7  the estimated costs of this proposal.

 8                            --o0o--

 9           AIR RESOURCES ENGINEER CHIN:  These costs are

10  based on the implementation of the grid-based

11  infrastructure on the shore side.  Staff estimates the

12  overall costs, in 2006 dollars, would $1.8 billion.

13           The majority of the cost will be for equipping

14  the ships with shore power equipment.  This cost is based

15  on the modification of nearly 80 berths at six ports and

16  the equipping of over 1,400 ships.  Costs would be

17  significantly lower if new ships are designed to use grid

18  power or if shipping companies minimize ship redeployment.

19                            --o0o--

20           AIR RESOURCES ENGINEER CHIN:  This slide shows

21  the cost effectiveness of the proposal.  Two methods for

22  estimating cost effectiveness were used.  The cost

23  effectiveness values given at the top of the chart are

24  based upon the entire cost being assigned to a single

25  pollutant.  The cost effectiveness values at the bottom of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           206

 1  the chart are based upon half of the total costs assigned

 2  to NOx emissions and the other half assigned to diesel PM

 3  emissions.

 4           The $6.00 per pound of NOx reduced is well within

 5  the cost effectiveness of the other measures adopted by

 6  the Board.

 7           The PM cost effectiveness values are high due in

 8  part to the previously approved auxiliary engine

 9  regulation which reduces PM emissions by 70 percent.

10  Consequently, these values are above cost effectiveness of

11  regulations previously approved by the Board.

12           In summary, while the proposal will require

13  significant capital investment, it is a cost effective NOx

14  regulation and also achieves significant reductions in

15  diesel PM and CO2.

16                            --o0o--

17           AIR RESOURCES ENGINEER CHIN:  State funding will

18  likely be available to partially offset the costs for

19  projects that achieve reductions well ahead of the

20  requirements of the proposal.

21           For example, the Proposition 1B bond funding

22  could make substantial funding available for shore side

23  infrastructure improvement for projects used in goods

24  movement.

25           The specific guidelines of the program will be


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           207

 1  presented for the Board's consideration early next year.

 2  Carl Moyer funding, which is administered by local

 3  districts, may be available for the projects that satisfy

 4  the program criteria.  Moyer funds could be used to assist

 5  conversion of cruise terminals.  The availability of these

 6  funds vary by district.

 7           To qualify for funding from either program, the

 8  reductions need to be achieved three years prior to the

 9  regulatory deadline and satisfy the applicable program

10  guidelines.  Additional incentive funds are expected from

11  some of the ports themselves.

12                            --o0o--

13           AIR RESOURCES ENGINEER CHIN:  As discussed

14  earlier, staff is proposing revisions to the

15  implementation schedule, compacting four schedules into

16  two, and more closely aligning the schedules between

17  grid-based option and the option that contains alternative

18  emission reduction techniques.

19           Staff also proposes to revise the definition of

20  fleet and person to add clarity and add a definition of

21  regulated California waters.

22           To accommodate these proposed revisions, staff

23  must make a number of revisions to the recordkeeping,

24  reporting, and planning requirements.  Staff proposes to

25  add a method for determining the point in the compliance


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           208

 1  period at which a violation has occurred.  Staff is also

 2  proposing several technical modifications that include

 3  incorporating standards for ammonia slip on ships using

 4  selective at catalytic reduction systems and additional

 5  plan requirements for terminals and ship operations.

 6                            --o0o--

 7           AIR RESOURCES ENGINEER CHIN:  Most of the

 8  comments we received pertained to the original

 9  implementation schedule.  We believe that we have

10  addressed most of these comments with our revised

11  schedule.  We have received other public comments.

12  Several commenters want more stringent and earlier

13  performance standards in the implementation schedule.

14  Staff believes that the recommended schedule is reasonable

15  and fair, is based on the time required to widely deploy

16  the emission reduction technologies, and that an

17  accelerated schedule cannot be successfully implemented.

18           Another commenter wanted best available control

19  technology to be applied immediately to distributed

20  generation technologies.  Staff believes that there is an

21  incentive to make these engines as clean as possible in

22  order to achieve required emission reductions with less

23  equipment.

24           One commenter wanted the shore side

25  infrastructure plans to be required of the ports, not the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           209

 1  terminals.  Staff believes that terminal plans are

 2  appropriate because of the working relationship between

 3  the terminal operators and ship operators.  It is the

 4  ships that will be required to reduce emissions.  We know

 5  that to meet the requirements of this regulation, the ship

 6  operators, the terminals, the ports, and the local utility

 7  companies must work together.

 8                            --o0o--

 9           AIR RESOURCES ENGINEER CHIN:  In summary, the

10  proposed regulation to reduce hoteling emissions from

11  oceangoing ships at California ports satisfy the goals of

12  the Goods Movement Plan and the Diesel Risk Reduction Plan

13  by reducing both NOx and diesel PM by 80 percent by 2020.

14           Additionally, the proposed 2014 milestone assists

15  the South Coast AQMD's efforts to attain the PM2.5 and

16  ozone standards.

17           Staff has demonstrated that the proposed

18  regulation is cost effective.  Therefore, staff recommends

19  that the Board adopt the proposed regulation with staff's

20  proposed modification.

21           This concludes my presentation.  At this time we

22  would be happy to answer any questions.

23           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Grant.

24           I want to reiterate for the Board that this rule

25  will do four things that we're very concerned about.  One,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           210

 1  it relates to the Diesel Risk Reduction Plan, the State

 2  Implementation Plan, the Goods Movement Plan, and the

 3  Greenhouse Gas Reduction Plan.  So it's an important rule.

 4           CHAIRPERSON NICHOLS:  Thank you for that.  I

 5  believe we also have a statement from the Ombudsman about

 6  the public participation process.

 7           OMBUDSMAN QUETIN:  Thank you, Chairman Nichols

 8  and members of the Board.

 9           This proposed regulation has been developed with

10  input from ports, utilities companies, shipping companies,

11  terminal operators, environmental groups, planning

12  coalitions, distributive generation and alternative

13  control technology companies.  Shore power consultants

14  construction consultants, shipping and petroleum

15  associations, and labor unions.

16           Staff began their efforts in November 2004 with

17  the development of a draft shore power evaluation report.

18  Development of the regulation began in January of this

19  year.  Between then and November of 2007, they have held

20  ten work group meetings and workshops.  These meetings

21  included two workshops held during evening hours in

22  community centers in Wilmington and west Oakland.

23           On average, 40 to 50 people attended the workshop

24  meetings.  Some of them attending via webcast or

25  teleconference.  In addition, staff's outreach efforts


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           211

 1  including over 170 personal contacts via telephone calls

 2  and individual meetings.

 3           Staff also made numerous visits to California

 4  ports during this time that included meetings with port

 5  representatives as well as tours of specific activities at

 6  the ports.

 7           At one of these meetings, they toured a container

 8  ship that was equipped with shore power capability and

 9  observed the demonstration of a portable distributive

10  generation power source for powering container ships while

11  in port.

12           The staff report was released for public comment

13  on October 19th, 2007.  It was noticed on the ARB website,

14  and an internet message was send to the over 2,000 people

15  on the shore power list serve.  Thank you.

16           CHAIRPERSON NICHOLS:  Very good.  Thank you.

17           If there are no Board questions --

18           SUPERVISOR HILL:  I did have a question if I

19  could, Madam Chair.

20           First of all, I wanted to thank the staff.  The

21  Bay Area District has worked closely with the port of

22  Oakland in an alternative fuel source.  And you were very

23  accommodating and really worked closely and diligently I

24  think to come up with some solutions for that.  So thank

25  you for that.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           212

 1           The question I had -- and in reading this there

 2  is a time element when the ship is docked to when the ship

 3  that is to plug in if plug in is available.  What is that

 4  time?  It said like three to five hours I remember or

 5  something like that.  I'm just looking for clarification.

 6  Is it three hours to five hours -- and if it is three to

 7  five, why wouldn't it be just as soon as you practically

 8  can do it?

 9           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  I'm

10  Mike Waugh, Manager of the Program Assistance Section.

11           In discussing this requirement with the carriers,

12  there is a period of time when, for example, there would

13  be an inspection by the homeland security up front or

14  maybe in the back of the visit before the vessel left.

15  There might be -- the ship might be held up at the last

16  minute because of coast guard and ship traffic.

17           So what we tried to account for here is that

18  essentially it should be applied as quickly as possible.

19  We think that were the revisions we put here with the

20  megawatt hours having to be shifted that that provides the

21  incentive to do it as quickly as possible, but

22  understanding that sometimes the vessel is not released

23  from homeland security up front or has been held up by the

24  coast guard in the back.  So the three hours would be

25  required for ships that can synchronize their electricity.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           213

 1  They don't know black.  They synchronize their

 2  electricity, and so they can leave more quickly.

 3           The five hours is the rare occasion when you have

 4  someone who looses power momentarily.  They have to start

 5  up their gyros again at the very end.  So they need some

 6  additional time.  So the three hours would be one.  Five

 7  hours would be the other based upon our conversations with

 8  the carriers, the inspections needed, the release by the

 9  coast guard.

10           SUPERVISOR HILL:  But if they can do it in two

11  hours or one hour, they wouldn't have to do it within that

12  period of time?

13           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  Those

14  are maximum allowed times that we have in our regulations.

15           SUPERVISOR HILL:  And the incentive.

16           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  The

17  incentive we have now would be if you're trying to get the

18  megawatt hours shifted over, you'd want to do that as

19  quickly as possible.  It's not only the visit, but how

20  much power you reduced on board.  So there's the incentive

21  to do it as quickly as possible with the understanding

22  that we would allow a maximum of three hours if you're

23  synchronized on the trip on the visit, a maximum of give

24  hours if you're not on the visited.  We think the

25  incentive is built in there to do it more quickly.  But


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           214

 1  those are maximum allowable.

 2           SUPERVISOR HILL:  Thank you.

 3           CHAIRPERSON NICHOLS:  Any other Board questions

 4  before we hear from the public?

 5           BOARD MEMBER D'ADAMO:  Question of staff and a

 6  request of the commenters that will be coming up on the

 7  issue of the 25 or less visits.  I'm very comfortable with

 8  what staff is proposing and think that you've had to walk

 9  a very fine line here between public health and economic

10  impact.  But I'm just a little uncomfortable on the 25

11  visits and curious what folks have to say about whether or

12  not this could get gamed.  I guess it refers to fleets.

13  Could a dummy company be created so there could be more

14  visits.

15           And I just seems to be a relatively high number

16  perhaps in the out years.  Not the early years.  Seems

17  like a low number, and it would be appropriate in the

18  early years.  But as we go out into the out years, the

19  question of staff and of the commenters should that number

20  be reduced.

21           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  Thank

22  you.  With the existing data that we have, for example,

23  with container ships, with the containers ships and with

24  the cruise ships that with this exemption that we have for

25  the occasional fleet visitor to California where it would


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           215

 1  not be cost effective for the occasional fleet to show up,

 2  that based on current data for the container ships, the

 3  affected fleets made an average of 108 visits and the

 4  exempt fleets made a visit average nine times.  So there's

 5  a break right there that either you're doing business in

 6  California and making a lot of visits.  Then you have the

 7  stragglers that come.  So we think we have really good

 8  coverage there with container ships.

 9           The same thing with cruise ships.  You have these

10  large fleets like Celebrity or Carnival and Princess, and

11  then you have an occasional visitor from a different fleet

12  that would be exempt.

13           We have proposed some changes in the definition

14  of fleet and the definition of a person.  We will be

15  getting wharfinger data annually from the ports.  And with

16  the compliance reports that we'll be getting from the

17  vessel operators, we'll be able to determine whether or

18  not there are ships that are unaccounted for in fleets.

19           The wharfinger data does identity who the fleet

20  operator is.  So we will be monitoring this.  If we find

21  out there's some attempt to splinter a fleet, for example,

22  and to get an exemption, we'll be able to detect that very

23  quickly and would be willing to modify the regulation to

24  tighten that up.  We think we have good coverage now.  But

25  if something were to occur later, we'd be able to pick


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           216

 1  that up quickly and modify the regulation if needed to be

 2  modified.

 3           CHAIRPERSON NICHOLS:  Okay.  Thank you.

 4           Yes, Ms. Berg.

 5           BOARD MEMBER BERG:  Thank you.

 6           As far as enforcement, could you talk a little

 7  bit about enforcement and touch also upon what the

 8  strategy is going to be and what will happen if power from

 9  the grid may not available for whatever reason?

10           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  Thank

11  you.  There is a lot of recordkeeping involved with this

12  regulation.  One of the reasons for that is that these

13  sources of emission leave the state.  So it's not quite as

14  easy to be able to go out and do an inspection on any

15  particular ship.  So we have very extensive recordkeeping

16  and reporting requirements in terms of enforcement.

17           We feel like because of the recordkeeping that we

18  will be able to determine whether compliance reports we'll

19  be able to determine compliance with this.  We have a

20  proposal that we're going to try to determine a little bit

21  more clearly the nature of the violation when it occurs

22  with regard to these fleet averages.  So we've been

23  working on a lot of recordkeeping and inspection in fact.

24           STATIONARY SOURCE DIVISION CHIEF FLETCHER:

25  Relative to your question on what happens if the grid is


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           217

 1  down and they cannot get power, they're not obviously

 2  required to hook up.

 3           But at this time, we're still making them

 4  accountable for the emission reductions.  And we think in

 5  the event there was a major interruption in grid power

 6  that necessitated a revision to that, then we would look

 7  at this on case by case basis.  And we have interrupts in

 8  power from time to time.  You know, we had them recently

 9  with the fires in San Diego where the Navy shut off their

10  grid shore power.  But we don't think it will be

11  sufficient to substantially change the requirements we

12  have for 50 percent and 80 percent on grid in those years.

13           BOARD MEMBER BERG:  Thank you.

14           On the compliance, who is out of compliance if

15  the criteria isn't met?

16           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  The

17  ship owner operators would be responsible.  And Floyd may

18  want to elaborate on that in terms of the violation.

19           SENIOR STAFF COUNSEL VERGARA:  This is Floyd

20  Vergara, Senior Staff Counsel.

21           Bob is correct.  The onus would be on the ship

22  operators to make sure they are in compliance with

23  basically the engine shut down requirements of the

24  regulation.  And so if they are operating their vessels in

25  violation of the specified shut down requirements, then


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           218

 1  they would be found in violation and held liable for that.

 2           BOARD MEMBER BERG:  Thank you.  You answered any

 3  question.  Thank you very much.

 4           CHAIRPERSON NICHOLS:  Any others?  Okay.  We have

 5  18 witnesses.  We're going to impose the three-minute rule

 6  on testimony.  There is a time keeper up here.  If any of

 7  you weren't here this morning, the light goes on so you

 8  can see it when you're at the podium.  If you get to the

 9  three-minute point after the red light goes on, there's

10  also a really annoying buzzing sound.  So I think it's

11  kind of a self-enforcing mechanism.

12           So we'll start out with Rhey Lee representing

13  Vice Mayor Bonnie Lowenthal from City of Long Beach,

14  followed by Diane Bailey, and Bonnie Holmes-Gen.

15           MS. LEE:  Good afternoon, Chair Nichols and

16  members of the Board.  My name Rhey Lee.  I'm here to read

17  a statement on behalf of the Vice Mayor Bonnie Lowenthal

18  from the City of Long Beach.

19           I urge the adoption and implementation of

20  regulations to require oceangoing vessels to reduce their

21  emissions while docked at a California port.

22           I'm supportive of the strictest regulations that

23  would result in the greatest reductions of emissions in

24  the earliest possible time frame.  Currently, ocean-going

25  vessels run diesel auxiliary engines while docked at berth


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           219

 1  to run on-board equipment.  According to the CARB staff

 2  report, these vessel generated 1.8 tons per day of diesel

 3  particulate matter and 21.1 tons per day of nitrogen oxide

 4  in California in 2006.

 5           I have promoted and supported cold ironing as an

 6  alternative power at the port of Long Beach since 2001

 7  when I was first elected.  The health of communities

 8  adjacent to the port and throughout the state of

 9  California are being negatively impacted by the harmful

10  pollutants generated by oceangoing vessels docked at

11  berth.  These harmful pollutants cause and elevate serious

12  health problems such as the risk of cancer, respiratory

13  and cardiovascular illnesses, and premature mortality.  I

14  urge you to adopt regulations to maximize emissions

15  reductions and protect our communities' health as early as

16  possible.

17           Thank you.

18           CHAIRPERSON NICHOLS:  Thank you.  And thank the

19  Vice Mayor for her testimony.

20           This gives me an opportunity to mention yesterday

21  when we held a press conference down in Long Beach to

22  announce in advance what was on the agenda here today, I

23  had the opportunity, but I thought I should do it again

24  here today, to acknowledge that these rules which are

25  statewide rules are a floor which local ports can go


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           220

 1  above.  The ports themselves can have stricter regulations

 2  of what goes on on their ports if they choose to do so

 3  within the limits of their own legal authority.

 4           And I want to acknowledge that, at least with

 5  respect to Oakland and L.A. and Long Beach, there's a lot

 6  of activity that's already going on at the local level.

 7  So this is not a situation where ARB is coming into a

 8  territory where nothing is going on.  These are important

 9  rules for us because of our legal authority and the

10  requirement that we act under state law.  And these are I

11  think very strong rules.

12           But local districts and local ports are free to

13  do more if they want to.  And I'm happy to say many of

14  them have chosen to do that.  So just wanted to put that

15  out there on the record.

16           Okay.  Diane Bailey.

17           MS. BAILEY:  Good afternoon, Chairwoman Nichols,

18  members of the Board, and staff.  My name is Diane Bailey.

19  I'm a scientist with the Natural Resources Defense

20  Council.  And I'm here today in very strong support of

21  this rule.

22           We are so pleased to see this rule finally go to

23  the Board.  As many of you know, we've been working on

24  this issue for many years now generally to get the ports

25  in California cleaned up and especially when it comes to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           221

 1  the marine vessels to get them to shut their dirty engines

 2  down and plug them in.

 3           This issue is extremely important to the harbor

 4  side communities in California where residents are facing

 5  a staggering health toll.  For example, in West Oakland,

 6  not too far from where I live, children in West Oakland

 7  face asthma rates of one in five.  And so we don't have

 8  any representatives here today from West Oakland, but this

 9  rule is very important to them.  And I just want to pass

10  on their thanks for bringing this rule.

11           We've submitted some detailed written comments,

12  and I just want to pull out some of those points.  We

13  really appreciate staff's efforts to make some

14  improvements to this rule.  And we just have a few

15  remaining concerns where we think some minor modifications

16  can strengthen this rule and prevent some loopholes in the

17  future.

18           One of them was mentioned a few minutes ago, and

19  it has to do with the threshold of ship visits, the 25

20  visit threshold for container and reefer ships and the

21  five visit threshold for cruise ships.  We feel this

22  threshold is too high, and it could potentially be gamed.

23  And we're really hoping that thoughtful consideration

24  could be given to ratcheting that threshold down.  At the

25  very least during final compliance in 2020.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           222

 1           And our preferred threshold would be any more

 2  than two visits per year to any California port.  And when

 3  you look at some of these fleets, there's definitely the

 4  means there to pay for these modifications, especially

 5  where the modifications have already been made on the

 6  terminal side.

 7           Another issue I want to bring up is the fact that

 8  happily this is the first measure as an early action

 9  measure under AB 32 and we are very pleased to see that as

10  well.  We are a little concerned, however, that there

11  isn't a broader policy to prevent any greenhouse gas back

12  sliding with this rule.  And by that I mean that some of

13  the alternative compliance strategies may causes increases

14  in greenhouse gases.  And where there are no other

15  feasible means to comply, maybe that could be considered.

16  But in this case, we feel there are feasible alternatives

17  that would be positive on greenhouse gases, meaning we

18  would see reductions.

19           So I respectfully urge you to put in a no

20  greenhouse gas backsliding clause into this rule to

21  prevent that from happening.

22           And with that, I thank you very much and strongly

23  urge to you adopt this very critical rule.

24           CHAIRPERSON NICHOLS:  Thank you very much.

25           Bonnie Holmes-Gen and then John Kaltenstein and


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           223

 1  Henry Hogo.

 2           MS. HOLMES-GEN:  Good afternoon, Chairwoman

 3  Nichols and members.  Bonnie Holmes-Gen with the American

 4  Lung Association of California.

 5           I'm also very pleased to be here supporting this

 6  important regulation.  We strongly support the Air

 7  Resources Board moving forward to take action on this huge

 8  source of diesel emissions, both to reduce the immediate

 9  health threats in port communities and to enact an

10  important AB 32 early action measure.

11           And as you very well known, hoteling of ships is

12  generating a major public health threat in local

13  communities and contributing to our poor air quality

14  statewide.  And we are pleased to see the Air Board acting

15  today.  And one of our first messages is that it is

16  critical that you adopt this regulation today.  And we

17  urge you not to delay, not to send the regulation back to

18  staff, that we need to adopt this regulation and move

19  forward.

20           This regulation will mean a tremendous amount to

21  communities that are living next to the ports.  And I was

22  pleased that your staff calculated some of the health

23  impacts that would be avoided by the regulation.  And we

24  can see on paper that we're going to be avoiding over 280

25  premature deaths, over 8,000 cases of asthma related


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           224

 1  respiratory symptoms, hundreds of cases of acute

 2  bronchitis.  Tens of thousand of lost work days will be

 3  avoided.  This is a tremendous testimony to the importance

 4  of this regulation.

 5           As always, we do agree there should be some

 6  strengthening of the regulation.  We appreciate there's

 7  been a lot of significant improvements made by the staff.

 8  And we appreciate their hard work and still requesting

 9  that you make a couple of significant modifications.  And

10  the key one I wanted to mention is to agree with my

11  colleague, Diane Bailey, about our belief that you could

12  still accelerate the compliance time frame and add some

13  earlier targets for use of shore side power.

14           We believe that there is a strong basis for

15  accelerating the implementation and enforcement of this

16  regulation, because there are so many actions that are

17  already being taking at the ports of L.A. and Long Beach.

18  There is bond funding.  Prop. 1B funds will be available.

19  There probably be other statewide funds available to

20  assist in implementation.  And we believe we can do more

21  and get earlier public health benefits.  We believe that

22  the regulation would be stronger if the two compliance

23  pathways were unified into one pathway with an early

24  emission reduction target starting in 2010.  And that

25  would be consistent with the Goods Movement Emission


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           225

 1  Reduction Plan.  And we believe that should be a 20

 2  percent reduction target.

 3           So we would strongly ask you to consider speeding

 4  up, accelerating the implementation time frames for this

 5  regulation.

 6           We also agree with the comments of Diane Bailey

 7  about the need to strengthen the criteria for the coverage

 8  of the regulation that should be on a per ship rather than

 9  per visit requirement.  And we need to look at

10  strengthening the criteria for passenger ships.

11           Okay.  Last message is enforcement.  We urge you

12  to watch closely over the enforcement.  And we think that

13  you may need some additional resources and staff on this.

14  And we would like to work with you on that, because this

15  is going to be a huge effort, and we're going to need the

16  additional coverage to make sure that we're getting the

17  public health benefits, that we're getting emissions

18  reductions that are expected from this regulation.

19           Thank you.

20           CHAIRPERSON NICHOLS:  Thank you.  Appreciate it.

21           BOARD MEMBER BERG:  Madam Chair, may I ask a

22  quick question?

23           Do you see in the infrastructure that there is

24  going to need to be environmental impact studies or CEQA

25  process in order to get the power to the fence and through


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           226

 1  the port?

 2           MS. HOLMES-GEN:  I'm not sure.  I mean I assume

 3  there would be some environmental analysis that would have

 4  to be done clearly.

 5           BOARD MEMBER BERG:  Thank you very much.

 6           CHAIRPERSON NICHOLS:  Okay.  John Kaltenstein and

 7  Henry Hogo.

 8           MR. KALTENSTEIN:  Good afternoon, Madam Chair,

 9  Board members, and staff.  I appreciate the opportunity to

10  comment on this important precedent-setting regulation.

11           My name is John Kaltenstein, and I'm here on

12  behalf of Friends of the Earth.  Our organization supports

13  this rule, because it reduces harmful air emissions and

14  provides substantial public health benefits.  This rule

15  particularly helps impacted port communities subject to

16  diesel pollution from trucks, ships, and locomotives.

17  Never the less, the rule can be strengthened to hasten

18  emission reductions.

19           First, we joined with eleven other environmental

20  and public health organizations in calling for 20 percent

21  of ship visits to use shore power by 2010 in accord with

22  the Goods Movement Emission Reduction Plan goals.

23           Second, emissions for passenger fleets and

24  container and reefer fleets should be modified.  All

25  visiting passenger ships should use shore power at berth.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           227

 1  Cruise lines have the highest power requirements while

 2  hoteling, from five to eleven megawatts, and may stay in

 3  port for extended periods of time resulting in significant

 4  air emissions.

 5           More over, cruise lines have the resources with

 6  billions in revenues and profit and the capacity to make

 7  necessary retrofits.

 8           Container and reefer ships should also face a per

 9  vessel threshold of two visits on top of fleet

10  requirements to inhibit companies from circumventing the

11  rule.  In the least, if these exemptions are approved as

12  is, ARB staff should monitor their use to ensure they are

13  not abused.

14           And I just want to take out an example, too.  It

15  is my understanding that even within the Carnival

16  umbrella, certain lines, because it only comes in a few

17  times into San Francisco would be exempted.  And I think

18  just for the mass and the scale of a ship coming into port

19  and the impacts it would have, even though it only comes

20  in a few times, we believe it should be included within

21  the scope of this rule.

22           Lastly, Friends of the Earth urges the Board to

23  place high priority on the second phase of regulation for

24  tankers, vehicle carriers, tugboats, and cargo ships.  And

25  I know that's on the agenda with priority for 2008 and to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           228

 1  pick up the remaining 20 percent that was withheld from

 2  this one.

 3           And I'd like to commend Grant Chin, Tom Waugh for

 4  their excellent work and look forward to working with them

 5  again.  Appreciate your time.  Thank you.

 6           CHAIRPERSON NICHOLS:  Thank you very much.

 7           Henry Hogo followed by Matt Davis and Scott

 8  Johns.

 9           MR. HOGO:  Good afternoon, Madam Chair and

10  members of the Board.  Henry Hogo, Assistant Deputy

11  Executive Officer of our Mobile Source Division at the

12  South Coast Air Quality Management District.

13           I do have a PowerPoint presentation along with a

14  handout that I provided to the clerk, and if that could be

15  brought up.

16           While they're bringing it up, I do want to

17  commend the staff also for all the hard work they put into

18  developing the proposed regulation.  And the South Coast

19  AQMD staff is in general support of the proposed

20  regulation.  However, we do have some recommended

21  enhancements to the proposed regulation which we believe

22  will help get additional emission reduction and reduce

23  population exposure earlier.

24           If we could go to the next slide, please.

25           (Thereupon an overhead presentation was


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           229

 1           presented as follows.)

 2           MR. HOGO:  We're recommending that the proposed

 3  implementation schedule be revised to the schedule that

 4  was actually provided by staff in the October 2007

 5  version.  This is Section D(2)(b), which has the 20, 40,

 6  and 60 percent schedule for 2010, 2012, and 2014.

 7           In addition, it is critical that you set some

 8  interim targets for the grid-based power option.  At this

 9  time, the only criteria that we have is that ships need to

10  use the shore power if available.  We believe that you

11  need to set some sort of interim target, and we are

12  proposing that those interim target be the same as that

13  for the non-grid-based alternative or any combination.

14           Next slide, please.

15                            --o0o--

16           MR. HOGO:  In order to provide some compliance

17  flexibility, we believe that it's going take a long lead

18  time for shore power or grid-based power to come in play.

19  So we believe that there is some compliance allowance that

20  would be necessary prior to 2014.

21           We're proposing that in the equivalency

22  demonstration could be done to achieve those targets on a

23  port wide basis.  Basically, the proposed regulations on a

24  vessel operator basis at this time.  So on the average, it

25  should come out to be the same port wide.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           230

 1           In addition, we recognize that some berths, some

 2  terminals cannot put end of infrastructure as early as

 3  possible.  So we believe some exemption prior to 2014

 4  should be allowed.

 5           Next slide.

 6                            --o0o--

 7           MR. HOGO:  On the non-grid-based power option, we

 8  strongly believe that any technologies should be at best

 9  available control technology levels.  And they should be

10  consistent with local air district regulations.  As such,

11  we are proposing that the standard be set lower limit at

12  .2 grams per kilowatt hours prior to 2014 and .014 after

13  2014.

14           CHAIRPERSON NICHOLS:  I want to interrupt you on

15  that for a moment.  Because if somebody is going to be

16  installing a facility at a port that requires a permit

17  from you, you're going to be applying BACT requirements to

18  them anyway, aren't you?

19           MR. HOGO:  We believe so.  But it depends if the

20  equipment is considered portable and whether we allow that

21  to be considered.

22           CHAIRPERSON NICHOLS:  Okay.

23           MR. HOGO:  So that's the concern we have.

24           I do want to mention that a .03 is the average

25  utility base level at this time, and that will be in our


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           231

 1  local rule.  That's coming before our Governing Board in

 2  January.  So we believe after 2014 that could be met.

 3           Next slide.

 4                            --o0o--

 5           MR. HOGO:  We did some analysis of what the --

 6           CHAIRPERSON NICHOLS:  You can finish up.

 7           MR. HOGO:  We did some analysis of what the more

 8  aggressive schedule would bring in terms of emission

 9  reductions.

10           As you can see from this slide, by 2014, we can

11  see almost an additional two tons per day of NOx

12  reduction.  As you know, we need those reductions for

13  South Coast.  And we also looked at what the cost would be

14  to implement some of these technologies, and we based it

15  on a per container basis, a 20-foot container equivalent

16  unit.

17           And as you can see here, all these technologies

18  are about the same in cost.  And we believe the vessel

19  operator of the ship can actually recoup this cost at a

20  nominal charge of only about two dollars per 20 foot

21  container.  So we believe this is really not a costly rule

22  in the sense that the cost can be recouped over time.

23           And by last slide is to urge your Board adoption

24  of the proposed regulation and consider the revisions.

25  Thank you.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           232

 1           CHAIRPERSON NICHOLS:  Thank you very much.

 2           Matt Davis from Port of Oakland, and Scott Johns

 3  and Eric Witten.

 4           MR. DAVIS:  Good afternoon, Madam Chair and

 5  members of the Board.  My name is Matt Davis.  I'm

 6  representing the Port of Oakland.  It's pleasure to be

 7  here today.

 8           I'd first like to thank the Board and staff, let

 9  you know how much we appreciate the hard work and

10  consistent dialogue that have gone into crafting a rule

11  that will result in reduced emissions from oceangoing

12  vessels.  But we have background from the outset.

13           The port of Oakland has expressed its serious

14  concerns over any rule that would mandate a power grid

15  only shore power requirement.  In Oakland, the provision

16  of shore power through the grid is estimated to cost $90

17  million and could take years to implement at best.  To put

18  that number in context, our annual maritime revenues are

19  approximately only in comparison $120 million, which would

20  create a severe hardship.  And we're also backed by nearly

21  $1.5 million in debt due to previous improvements on our

22  terminals.

23           It would be difficult to recover these costs

24  through tariffs in our lease agreements as our position as

25  a discretionary port of call requires we provide the most


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           233

 1  cost effective services and facilities to maintain our

 2  business and continue to deliver economic benefits to

 3  local, regional, and state economies.

 4           That being said, we have reviewed the 15-day

 5  revisions.  And pending review of the final rule are

 6  pleased to offer our support for the changes that create

 7  incentives for early reductions and also create a level

 8  playing field so that alternative reduction measures, such

 9  as distributed generation systems, can continue to emerge

10  and mature.

11           These alternatives have the potential to deliver

12  near-term air quality benefits and also serve as a

13  long-term option for ports such as Oakland that might not

14  be able to deliver a cost effective grid power option.

15           We still have some unanswered questions as to how

16  this rule will accurately and reasonably calculate a

17  baseline level of fleet emissions for new and/or expanded

18  shipping activity that might occur after the rule is in

19  effect.  For example, the port of Oakland is actively

20  marketing its facilities and hope to see growth in its

21  cargo throughput.  We would be interested in learning how

22  new shipping lines and fleets that call on Oakland in 2012

23  or 2014, for example, will be able to calculate a

24  reasonable emissions reduction target when their baseline

25  level emissions in Oakland right now is essentially zero.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           234

 1           On this and other questions that will certainly

 2  arise, we look forward to continued dialogue with ARB

 3  staff so this rule can help achieve the air quality

 4  improvements that we all support, while still allowing for

 5  the economic benefits and activity the port of Oakland

 6  provides as an economic engine of the bay area.

 7           So in conclusion, I'd like to again thank the

 8  Board and staff.

 9           And in reference to the earlier question that was

10  raised, in 2006, we had approximately 1900 unique ship

11  calls, of which 93 percent were of fleets composed of 25

12  or more vessels.  So it's a very small fraction that we

13  would expect would not be subject to this rule.

14           CHAIRPERSON NICHOLS:  Thank you for that

15  information.

16           Scott Johns, Eric Witten, and then Joy Williams.

17           MR. JOHNS:  Good afternoon.  My name is Scott

18  Johns, Clean Air Marine Power, a division of Clean Air

19  Logix.

20           First, we'd like to thank the staff for their

21  hard work on this regulation.  Also for acknowledging that

22  alternative technologies are available today and that we

23  are able to meet the 2020 goals pretty much immediately.

24           We'd also like to urge the Board to go ahead and

25  vote for this regulation.  Thank you.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           235

 1           CHAIRPERSON NICHOLS:  Thank you.

 2           Eric Witten.

 3           MR. WITTEN:  Good afternoon, Madam Chair and

 4  Board and staff.

 5           I want to commend the staff for their diligent

 6  and hard work over the past couple of years and personally

 7  wanted to thank Grant Chin and Mike Waugh for their

 8  professionalism.  I met with them probably 18 or 20 times

 9  in the last year maybe.  And they've always treated me

10  with kindness and professionalism.

11           I've read the proposed 15-day revision and

12  support that revision and believe that it goes a long way

13  to allowing multiple technologies.  And even those that we

14  don't know about today would be able to function under

15  this rule.

16           I believe that the regulation should be approved,

17  and I voice my support for that.  And I want to thank

18  again the staff for the hard work and for listening and

19  taking the time to make the best regulation possible.

20  Thank you.

21           CHAIRPERSON NICHOLS:  Appreciate that.

22           Joy Williams and then Jim Flanagan, Thomas

23  Jelenic.

24           MS. WILLIAMS:  Hello.  I'm Joy Williams from the

25  Environmental Health Coalition.  We're a 27-year-old


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           236

 1  nonprofit environmental health and justice organization in

 2  the San Diego/Tijuana region.  Environmental Health

 3  Coalition signed onto the support letter submitted by

 4  Candice Kim and other environmental and community

 5  organizations, and we concur with their comments on the

 6  shore power rule.

 7           This is our first appearance before this Board on

 8  a goods movement issue, and I would like to take the

 9  opportunity to thank and commend the staff on their hard

10  work on development of both the ship and truck rules.

11           Environmental Health Coalition works in two low

12  income communities of color that are located adjacent to

13  San Diego Bay and the cargo terminals.  Barrio Logan is

14  immediately downwind of the 10th Avenue terminal and the

15  old town community of National City, is a closest

16  neighborhood to the National City marine terminal.

17           Our community's concerns with diesel pollution

18  have led to a focus on the ports as a major source of both

19  pollution and truck traffic.  A year ago, we asked the

20  port of San Diego to begin development of a green ports

21  plan, and the port did agree to development of a plan to

22  address the air quality impacts of port operations.

23           The first step, a baseline inventory of emission

24  sources, has been completed.  The inventory confirms that

25  container ships and cruise ships are appropriate targets


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           237

 1  for shore power in San Diego.  Hoteling at berth is the

 2  single largest source of both particulate and greenhouse

 3  gas emissions in this analysis.  The cruise ships and

 4  reefers of the first and third top sources of emissions

 5  respectively.  So cold ironing of these ships is an

 6  essential step in reducing exposure to diesel particulates

 7  in Barrio Logan and other harbor side communities.

 8           At the same time, we note that in San Diego the

 9  bulk ships are also a large part of the current problem

10  and in fact comprise all the ships that berth in National

11  City.  Auto carriers, for example, are the second top

12  source of pollutant emissions and greenhouse gases.  And

13  bulk ship as a whole are fourth.

14           Cement ships make relatively few calls but stay

15  in port for seven to ten days at a time.  And the port's

16  current maritime business plan identifies growth

17  opportunities in bulk fruit, steel other bulk cargo, so it

18  seems be probable the source of emissions will increase.

19           For this reason, we urge you to address the bulk

20  carriers in the near futures with a rule that requires

21  shore power or equivalent reductions for this emissions

22  source.

23           In conclusion, we support the shore power rule

24  for cruise and container ships and urge you to adopt it

25  with the amendments suggested by others, to add a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           238

 1  threshold for individual ships, and to harmonize the

 2  compliance time line for all the energy sources.

 3           In addition, we hope to see emissions reduction

 4  requirements extended to bulk ships in the future.  Thank

 5  you.

 6           CHAIRPERSON NICHOLS:  Thank you.

 7           Jim Flanagan and then Thomas Jelenic.

 8           MR. FLANAGAN:  Madam Chairman, distinguished

 9  Board members, thank you for allowing us the opportunity.

10  My name is Jim Flanagan.  I represent Maersk, Inc., which

11  is an international steam ship company in the

12  containerized business.

13           It goes without saying that we are involved in

14  the port business in both Los Angeles, Oakland, and in

15  fact the entire west coast.  To date, we have switched

16  fuels in 80 different vessels.  Those vessels came into

17  port about 300 plus times.  So we're very well versed in

18  switching fuels.

19           In addition, we have shown our commitment to the

20  environment in California by not only switching in the

21  auxiliary engines, but also switching in the main engines.

22  We believe we are the only company that is doing this to

23  date.  So we're switching in the main engine also.

24           After reviewing the proposed regulation, we do

25  have a couple of concerns.  One of them is that we need to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           239

 1  have an even playing field regardless of the technology.

 2  Regardless if you want to cold iron or you want to do an

 3  alternative, we would like to see an even playing field.

 4  So that basically we would appreciate the ARB setting

 5  standards, setting time frames to meet those standards,

 6  and then basically standing back and letting industry seek

 7  the technology that will give you what you want with

 8  regard to emission reductions.

 9           We're really not against cold ironing, per se.

10  However, cold ironing is a shore-based technology that

11  does not travel with the vessel.  As a global carrier

12  operating more than a thousand vessels worldwide, we

13  believe that the best solution stays with the vessel and

14  therefore transfers those savings in emissions to other

15  ports throughout the world.  And as a global carrier,

16  that's what we are seeking, a solution that stays with the

17  vessel.

18           We've invested a lot of money over the years.

19  We've taken some firsts.  We believe we're the first to

20  put an SCR unit on a vessel.  We have done a waste heat

21  recovery, which captures the heat out of the smoke stack

22  and puts it back into energy to drive the vessel.

23           Right now we're working on a technology that we

24  think holds some real promise:  an electronic scrubbing

25  device.  However, again, the timing is critical to us.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           240

 1  It's going to take some time to get this technology up and

 2  running to where it will actually provide the emissions

 3  that we think it is capable of doing.

 4           We as a company hasn't shied away from our

 5  commitment to clean up the environment.  And it's always

 6  been more or less a timing issue with us.  Everyone we

 7  think wants to clean up the environment.  But there's a

 8  timing issue as to how fast we can do that.

 9           We have that commitment to the State.  We have

10  that commitment more importantly to ourselves to clean up

11  the fleet.  But we want to make sure that we do just that.

12  We clean up the fleet that travels throughout the world.

13           i want to thank you for your time.

14           CHAIRPERSON NICHOLS:  Thomas Jelenic followed by

15  Tim Carmichael and then T.L. Garrett.

16           MR. JELENIC:  Good afternoon, Madam Chair, Board

17  members.  My name is Thomas Jelenic.  I represent the port

18  of Long Beach.

19           The port of Long Beach appreciates the

20  opportunity to provide comments on the proposed shore

21  power regulation.  The port has aggressively pursued a

22  comprehensive plan to achieve emission reductions from

23  ocean-going vessels while at berth.  The initial plan was

24  incorporated into the Clean Air Action Plan, and major

25  steps are being taken to implement the port's commitment.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           241

 1           Since the plan was adopted, the port has made

 2  significant progress in providing the facilities necessary

 3  to connect vessels to shore power.  For example, at the BP

 4  terminal, infrastructure is nearly complete and systems

 5  testing is scheduled to begin within weeks.  At the ITS

 6  container terminal, electrical system improvements are

 7  underway and the system is on schedule for a May 2008

 8  start up.

 9           Engineering design for the retrofit of four

10  berths at two other container terminals is also underway.

11  The cold ironing rule as proposed is supported by the port

12  of Long Beach.

13           While the port supports the proposed regulation,

14  we also wish to bring to the Board's attention that the

15  proposal by some groups to accelerate the proposed

16  schedule is unrealistic for a number of reasons.  Two

17  items are at issue.  The schedule for providing grid-based

18  power and the viability of alternatives to grid-based

19  power.  In order to accomplish the required capacity

20  enhancements as well as ensure that service to each

21  terminal is enhanced to accommodate additional loads, the

22  port and Southern California Edison are working in concert

23  in this effort.  Given the phased nature of the work, we

24  have limited ability to move up completion of the initial

25  work.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           242

 1           Another concern is the impact the retrofitting of

 2  existing terminals will have on the tenants and cargo

 3  moving operations.  To construct the infrastructure

 4  necessary to connect the vessel to shore power, large

 5  segments of an operating terminal must be disrupted to

 6  install underground conduits.  Ship berths must be taken

 7  off line to install the outlets at the wharf.  And the

 8  terminal electrical system must also be upgraded, which

 9  requires system-wide outages.

10           We are working to carefully plan for how multiple

11  concurrent retrofit projects can take place while

12  minimizing the delay in cargo movement.  We do not believe

13  acceleration of the implementation schedule could be

14  achieved.  While the port envisions that alternatives to

15  grid-based power have an important place in reducing

16  emissions from ships that technology is not currently

17  mature, cannot meet the power needs of many vessels, and

18  will be most suitable for vessels not targeted by the

19  proposed regulation such as bulk vessels.

20           A disadvantage to distributed generation systems

21  is that a significant amount of space is required on the

22  wharf adjacent to the vessel.  As a result, the proposed

23  technology would not eliminate the need for infrastructure

24  or save time.  Since, unlike some other ports, the

25  terminals at the port of Long Beach do not have space in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           243

 1  front of key cranes to position such equipment.  Such

 2  equipment would need to be located in terminal backlands

 3  with the necessary trenching and wharf improvements

 4  constructed at the berth.

 5           While relying on the alternative technology while

 6  following the path to grid-based power would potentially

 7  double the cost of the emission reductions strategies

 8  while straining the resources of the port's engineering

 9  staff to meet the near term and long term cold ironing

10  solutions?

11           CHAIRPERSON NICHOLS:  Mr. Jelenic, could you

12  summarize, please?  We do have your letter.  We can read

13  faster than you can talk.

14           MR. JELENIC:  Okay.  Finally, it's important to

15  note that the port does not operate marine terminals.

16  Rather, we lease facilities and act as a landlord.  The

17  regulation has appropriately assigned responsibility where

18  it belongs, with shipping lines and terminal operators.

19  Thank you very much.

20           CHAIRPERSON NICHOLS:  Thank you very much.

21  Appreciate your support.

22           Tim Carmichael, T.L. Garrett, Nicole Shahenian.

23           MR. LLOYD:  Chair Nichols, Bob Lloyd with AGP

24  Video again.

25           The digital sound that you are hearing is due to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           244

 1  Blackberry phones.  So if you have a Blackberry or iPhone,

 2  if you could shut them off.

 3           CHAIRPERSON NICHOLS:  I turned mine off.  It's

 4  not me.

 5           MR. CARMICHAEL:  Good afternoon.  Tim Carmichael,

 6  Coalition for Clean Air.

 7           Let me start with just an appreciation of the

 8  fact that we are here today.  I was working on this issue

 9  on some level almost ten years ago when Sharla Pear

10  working with ACUREX and U.S. EPA and ARB first started to

11  breakdown where were all the emissions coming from the

12  ports complex.  You know, the ships off-shore, the ships

13  in port, the trucks, the docks side equipment.  And the

14  fact that we are here almost ten years later, it's been a

15  long time, but it's also really good that we are here.

16  And I know that the ARB staff, many of them have been

17  working on it for longer than I was even aware of the

18  problem, and I appreciate that as well.

19           Many of the comments I was going to make have

20  been made by my colleagues, Diane Bailey from NRDC and

21  Bonnie Holmes-Gen from American Lung.  I want to emphasize

22  there are dozens of activists around the state working on

23  this issue, and many of them here in southern California.

24  And I want to remind you the reason they're not here today

25  is not that they don't care.  There is a very important


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           245

 1  hearing down at the ports, a precedent-setting EIR hearing

 2  for one of the large marine terminals.  And that has many

 3  of our colleagues engaged elsewhere today on a similarly

 4  important issue.

 5           But the bottom line is the ships in port are huge

 6  sources of pollution.  And there are multiple ways to

 7  address that.  And we believe that the ARB staff has done

 8  a good job in capturing that in this regulation.  That

 9  said, we do agree with the South Coast that ARB could push

10  further sooner and require an accelerated schedule.  And

11  that adding to this ARB proposal a BACT requirement as the

12  South Coast requested we think is an appropriate thing to

13  do.

14           Again, we thank the staff very much for the work

15  they've done and we appreciate that we are here and ARB is

16  moving on this very, very important issue.

17           CHAIRPERSON NICHOLS:  Thank you for holding down

18  the fort.  We appreciate that.

19           BOARD MEMBER BERG:  Madam Chair, could I ask a

20  question?

21           CHAIRPERSON NICHOLS:  Yes, please.

22           BOARD MEMBER BERG:  Mr. Carmichael, since you so

23  noted that so many of your colleagues are down at the port

24  on an EIR matter, do you see EIR or CEQA issues being part

25  of this process.  And if so, are you in a position or your


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           246

 1  colleagues in a position to help move this process along

 2  if we were to look at trying to accelerate?

 3           MR. CARMICHAEL:  Yes to the first question.

 4           Now I'm not a CEQA attorney by any stretch of the

 5  imagination, not even an attorney.  We do assume that for

 6  the larger infrastructure projects there will need to be a

 7  CEQA review and there will be a process involved with

 8  that.

 9           That said, to the extent that the ports and the

10  construction crews are using clean equipment to do the job

11  and proposing to do that and that the project is designed

12  as we've been talking about to reduce emissions from the

13  system as a whole, we believe that the vast majority of

14  people that are commenting are going to comment favorably

15  and say let's get this done soon.

16           BOARD MEMBER BERG:  But it would be fair to

17  say -- it's important that the process take place and that

18  just takes time.

19           MR. CARMICHAEL:  It takes some time.

20           BOARD MEMBER BERG:  Appreciate your comment.

21           MR. CARMICHAEL:  Just one final point.  The South

22  Coast AQMD never forgets about CEQA.  So part of their

23  review and analysis and part of what they presented I'm

24  certain took that into consideration.  And nobody is

25  suggesting that the time line that the South Coast has


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           247

 1  advocated for and that we support is easy.  But it's

 2  doable.  And that's where we are coming from.  We need to

 3  be pushing as much as we can push.

 4           BOARD MEMBER BERG:  I would submit on the other

 5  side they would say we are pushing them.  So just trying

 6  to find that balance.  Thank you for your comment.

 7           CHAIRPERSON NICHOLS:  Thanks.

 8           T.L. Garrett and then Nicole Shahenian.

 9           MR. GARRETT:  Madam Chair, honorable Board

10  members, my name is T.L. Garrett representing the Pacific

11  Merchant Shipping Association.  We represent ocean

12  carriers and terminal operators on the west coast of the

13  United States that move approximately 90 percent of the

14  containerized cargo in and out of the United States.

15           We have a number of concerns remaining on this

16  regulation.  I want to command staff as well.  They've

17  been great to work with.  They've sat down and listened to

18  our concerns.  They scheduled special meetings with our

19  members to address the concerns.  But there are still a

20  number of them outstanding.

21           Just the highlight some of them, our biggest

22  concern has to do with the terminal operator being

23  responsible for the plant.  We believe that is

24  inappropriate.  We think since we have no land use

25  authority, no ability to do CEQA or issue permits to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           248

 1  ourselves, that it would be more appropriate on a port

 2  wide basis to assign that responsibility to the port

 3  authorities, have them do the planning documents, do the

 4  appropriate approvals, and also through their leasing

 5  authority amortize the cost again the broad number of

 6  terminal operators to take out some of the variability

 7  that's reflected in the cost effectiveness numbers here.

 8           We also think that this is an instance where the

 9  industry is far ahead of the public sector.  We have more

10  vessels out there today that are capable of being plugged

11  in then there are plugs for the vessels.

12           The staff report acknowledges the large number of

13  companies that have proactively taken measures, not just

14  for cold ironing, but for other technologies to address

15  these issues at the berth for the public health of the

16  citizens in California.  We are very proud of that.  And

17  if you look at the Clean Air Action Plan, those efforts,

18  your regulation essentially becomes a backstop measure for

19  the Clean Air Action Plan.  So there's no real analysis --

20  today is the first time I've seen an attempt by staff to

21  quantify the additional benefits of this regulation beyond

22  the Clean Air Action Plan.  We think more work needs to be

23  done on that.

24           We think that staff is going to move forward and

25  place that responsibility on the terminal operators.  At


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           249

 1  the very least, staff should be committed to coming up

 2  with detailed criteria so that as we are preparing these

 3  plans and talking about the number of terminals that you

 4  saw earlier, if we're preparing these plans, we know what

 5  it's going to take to get these plans approved when

 6  they're actually submitted.

 7           On another fairness issue, if a power utility

 8  cannot provide power to the ships through no fault of the

 9  ship operator, they shouldn't be penalized for the failure

10  by the power utility.  That should not be counted in their

11  overall compliance.

12           Finally, on the 15-day changes, we have one

13  significant concern.  And it has to do with the language

14  that ships must use shore power if available.  Some of the

15  terminals have gone ahead and provided for shore power.

16  Are we now to assume that because of their proactivity all

17  vessels now calling at those terminals are going to be

18  required to plug in?  It's a question to staff we haven't

19  had the opportunity to ask.  But we think it's a key

20  question, because I don't think you want to penalize early

21  compliance behavior.  I think the intent was actually to

22  provide a mechanism to develop credits.

23           Bottom line, we think the voluntary efforts that

24  have been demonstrated by the industry should speak for

25  themselves.  The Clean Air Action Plan adopted by the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           250

 1  ports should be allowed to proceed in a timely manner and

 2  that voluntary efforts will largely take care of this

 3  effort, and we ask you to step back from this regulation.

 4  Thank you.

 5           CHAIRPERSON NICHOLS:  Thank you, Mr. Garrett.

 6           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  If I

 7  might just make a clarification.  The requirement for

 8  hooking up to shore power if it's available is not a

 9  15-day requirement.  That has been part of the regulation

10  throughout.  So all we're saying is if you have the

11  capability to hook up and the berth has the capability to

12  hook up, then you need to hook up.

13           CHAIRPERSON NICHOLS:  Then do it.  Okay.

14           MR. GARRETT:  May I ask, does that apply to both

15  the vessel's ability as well as the berth's ability.

16           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  Yes.

17           BOARD MEMBER SPERLING:  Could I ask one question?

18  You said most large number of ships are already outfitted

19  capable to hook up to shore power?

20           MR. GARRETT:  There is a large number of

21  proactive companies that have gone down this technology

22  pathway.

23           BOARD MEMBER SPERLING:  Why is it?  Is it because

24  other ports in other parts of the world?  Why have they

25  done this?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           251

 1           MR. GARRETT:  I think they looked at it as a way

 2  to demonstrate their good citizenship, their corporate

 3  responsibility as a means of addressing what is perceived

 4  by all as a very real public health concern by the

 5  citizens of California.

 6           CHAIRPERSON NICHOLS:  Yes, Nicole Shahenian,

 7  followed by Kevin Norton.

 8           MS. SHAHENIAN:  Chairwoman Nichols, members of

 9  the Board, my name is Nicole Shahenian.  Thank you for

10  allowing me to speak today on behalf of Breathe

11  California.

12           Breathe California is comprised of five statewide

13  affiliate organizations throughout the state, including

14  offices in Sacramento, San Francisco, the Silicon Valley,

15  the Central Coast, and Los Angeles.  Since 1904, Breathe

16  California's five local agencies have worked to reduce the

17  impact of lung disease through prevention, education,

18  advocacy, and patient services.

19           Breathe California is in strong support of the

20  proposed regulation to reduce emissions from diesel

21  auxiliary engines on the ongoing vessels while at berth.

22  Marine emissions account for 30 percent of all diesel

23  particulate matter in California.  CARB's diesel

24  particulate matter exposure assessment for the ports of

25  L.A. and Long Beach found that emissions from ongoing


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           252

 1  vessels with the top cause of elevated cancer risk from on

 2  port sources.

 3           As trade volume increases, ships are expected to

 4  contribute roughly three-fourths of the diesel PM from

 5  freight transportation sources by 2020.  Communities

 6  living in close proximity to the ports experience higher

 7  levels of high health risk from the associated air

 8  pollution.

 9           This regulation will reduce the number of

10  premature deaths, prevalence of cancer, and impacts to

11  lung and cardiovascular health caused by exposure to dirty

12  diesel exhaust from ships.

13           We ask that the regulation be strengthened to

14  tighten loopholes and phase in early compliance rather

15  than defer all compliance until 2014.

16           In particular, we also ask that you close the

17  passenger ship loophole.  This regulation in its current

18  form exempts container fleets that visit a port less than

19  25 times per year and passenger ships that visit less than

20  five times per year.  This could result in a significant

21  loophole because polluting ships may not be required to

22  comply.  This requirement should apply to each vessel

23  rather than to fleets so that cruise lines and shippers

24  cannot create subsidiaries to evade public health

25  compliance.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           253

 1           Passenger vessels can remain in ports for

 2  extended periods of time, operating with hundreds of

 3  people on board and nearby communities breathing in

 4  significant amounts of harmful disease pollution.

 5           The rule should require all cruise vessels

 6  visiting California to use shore power while at berth.

 7           We also ask that you continue to reduce

 8  greenhouse gas reduction from -- greenhouse gas reductions

 9  from this regulation can be significant in achieving early

10  reductions in keeping with the spirit of AB 32, the Global

11  Warming Solutions Act.  Compliance should be held to the

12  GHG standards set for distributed generation or a higher

13  standard to ensure the maximum potential reductions

14  through this rule.

15           Breathe California encourages the Board not to

16  wait until 2014 for public health.  CARB's diesel risk

17  reduction plan commits to reducing the health risks from

18  diesel PM by 75 percent in 2010.  California may not be on

19  track to meet this target unless regulations such as this

20  one accelerate compliance.

21           CARB can send a clear signal to ports, terminal

22  operators, and shipping lines to ship incrementally

23  towards shore power by incorporating 2010 emission

24  reduction requirements and adding an interim deadline of

25  2012.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           254

 1           We support the Coalition for Clean Air's

 2  recommendation to achieve this goal articulated in the

 3  GMERP, twenty percent of all ship visits to California

 4  ports using shore power by 2010.  We urge CARB to phase in

 5  compliance so that by 2012 40 percent of ship visits be

 6  required to use shore power and 60 percent of ships would

 7  be required by 2014 and 80 percent by 2016.

 8           CHAIRPERSON NICHOLS:  Your time is up.

 9           MS. SHAHENIAN:  Thank you.

10           CHAIRPERSON NICHOLS:  Thank you.

11           Kevin Norton and Seiichi Tsurumi, Rupal Patel.

12           MR. NORTON:  Good afternoon, Madam Chair and

13  Board members.  My name is Kevin Norton.  I represent IBW

14  Local 11 and our 8,000 members who work in Los Angeles.  I

15  also represent the IBW statewide and our 110,000 members

16  who work in all aspects of the electrical power industry.

17           Our members built and operate the shore power

18  system in the port of Los Angeles currently in place.  We

19  support the use of cold ironing shore power.  We believe

20  it's high time to promote relief for everyone who lives

21  and works in the port areas.

22           Secondly, we know that the largest industry in

23  Los Angeles County is logistics.  The port of Los Angeles,

24  port of Long Beach are the backbone of this industry and

25  provide middle class jobs to thousands of people.  The


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           255

 1  only way to grow the ports and create more good jobs is by

 2  decreasing the impact of the ports on the surrounding

 3  communities.

 4           I'd like to address the availability of power for

 5  this initiative.  There's ample power available for shore

 6  power, and there's 12 power plants currently being planned

 7  that were initially approved by the AQMD this summer.  One

 8  plant, the Vernon power plant, would provide 914 megawatts

 9  of power.  There are also several solar power plants being

10  approved in the Inland Empire as we speak.

11           We also support other proven technologies as a

12  supplement to shore power.  Finally, the goals are

13  achievable if the will is there to implement the plan.

14  The highly skilled men and women of the IBW and our union

15  contractors are willing to get to work on this critical

16  project as soon as you approve it.  Thank you.

17           CHAIRPERSON NICHOLS:  Thank you, Mr. Norton.  Do

18  you represent the workers at one of the utilities here or

19  just in general?

20           MR. NORTON:  IBW represents Edison workers, DWP,

21  Burbank power workers.

22           CHAIRPERSON NICHOLS:  You're speaking on behalf

23  of all of them?

24           MR. NORTON:  I'm speak on behalf of the IBW.

25           BOARD MEMBER BERG:  Madam Chair, I'd like to make


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           256

 1  a comment.  I appreciate the speaker bringing up the fact

 2  that we do have power plants on the drawing board.

 3  However, the Vernon power plant is currently being taken

 4  to court.  And those types of things are just very

 5  problematic between the communities that live around

 6  Vernon and the environmental groups and the environmental

 7  justice issues.  And so it is not always as clear as it

 8  could be.  So we are hopeful that down the road we'll be

 9  able to see some of these come to fruition because they

10  are cleaner.  They should be cleaner.  But it isn't easy.

11           CHAIRPERSON NICHOLS:  Okay.  Thank you.

12           Mr. Tsurumi followed by Mr. Patel.

13           MR. TSURUMI:  Madam Chair, members of the Board,

14  my name is Seiichi Tsurumi.  I represent Sound Energy

15  Solutions.  Sound Energy Solutions is working to develop

16  an liquefied natural gas import terminal in the port of

17  Long Beach.  SCS has long been an advocate for increasing

18  the use of cleaner burning liquid natural gas in the

19  transportation industry.

20           We have funded and managed the development of the

21  world's first LNG terminal tractors.  These units, which

22  are the cleanest yard tractors available at the time of

23  their use, were demonstrated at berth Yusen terminals,

24  Inc. in the port of Los Angeles and the Long Beach

25  container terminal in the port of Long Beach.  Yusen


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           257

 1  Terminals, Inc., is still using these LNG powered units.

 2           SES also helped to develop LNG yard tractors for

 3  use in the BNSF intermodal facilities and have recently

 4  agreed to help international transportation service in the

 5  port of Long Beach develop a new LNG yard hustler

 6  demonstration project.

 7           We are therefore very pleased to see the efforts

 8  of those who are working to reduce emissions from hoteling

 9  oceangoing vessels through the use of LNG fueled on-dock

10  power generation.  SES is excited about this technology.

11  LNG fueled on-dock powered generation is a technology that

12  is available today to provide power to berthed ships at

13  emissions rates comparable to the state's electrical grid.

14           Having been a part of Long Beach community for

15  over five years, SES understands the severe impacts that

16  pollution from port operations has on local communities,

17  particularly those who are already disproportionately

18  impacted by hazardous air quality at their homes and work

19  places.

20           SES is dedicated to being a part of the solution

21  for these communities by working towards the development

22  of cleaner alternatives to conventional transportation

23  technology.  We firmly believe that liquefied natural gas

24  offers the ability to dramatically reduce diesel emissions

25  in the entire port area and believe the clean air maritime


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           258

 1  marine powered technology is another great example of

 2  this.

 3           Lastly, SES urges the Board to accelerate the

 4  requirements for shore power so that local communities can

 5  enjoy the benefits of reduced emissions from diesel fueled

 6  auxiliary power units sooner rather than later.

 7           Thank you very much.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           I'm assuming this is a solution that would

10  qualify for treatment as an alternative to meet the

11  deadline.

12           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  I

13  think what it is is SES has the LNG and some of the

14  distributive generation use LNG so it's a compatible

15  solution.

16           CHAIRPERSON NICHOLS:  And it's Ms. Patel.  I said

17  Mr. before.

18           MS. PATEL:  Good afternoon.  My name is Rupal

19  Patel, and I represent Communities for Clean Ports, a

20  nonprofit public education campaign based in Los Angeles.

21           Particulate matter emissions from international

22  shipping vessels cause 60,000 annual deaths worldwide.

23  And we echo many of the statistics that were related today

24  on the cancer risk around the ports and the elevated lung

25  health issues that also exist.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           259

 1           So early and aggressive and significant emission

 2  reductions from ships docked at California ports are

 3  critical to the environmental and public health of our

 4  state.

 5           We support ARB's latest revisions to the

 6  regulation which move toward a uniform time line and a

 7  compliance requirement for short power regardless of which

 8  technology is used.  However, we are also disappointed

 9  that the time line has been slowed down and relaxed.

10  ARB's March 2006 study on cold ironing at California ports

11  concludes that 20 percent of ship calls utilizing cold

12  ironing by 2010 is both technologically feasible and cost

13  effective.  The current proposal now requires cold ironing

14  only if available or ten percent reduction of emissions by

15  2010.

16           Significant emissions are possible now with

17  alternative technologies which have shown to deliver

18  comparable and immediate reduction benefits to grid-based

19  shore power.  Those technologies will result in air

20  quality relief today, not seven years from today, as AQMD

21  outlined in their presentation.

22           So again we support uniform time line for

23  compliance, but ask that the regulation's pace be set by

24  the most aggressive technology that is available now.

25           We urge the ARB Board to adopt regulation which


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           260

 1  will require, regardless of technology, that 20 percent of

 2  all ship visits to California ports use shore power by

 3  2010.  And further, ARB should include an additional

 4  interim goal by 2012 that 40 percent of all ship visits be

 5  required, 60 percent by 2014, and 80 percent by 2016.

 6           These compliance deadlines will assure early and

 7  aggressive emission reductions necessary to address the

 8  public health and environmental crisis that ships so

 9  grossly contribute to.  We will also assure that federal

10  air quality standards will be met in a timely manner.

11           We urge you to adopt these regulations today and

12  thank you for your leadership on this critical issue.

13           CHAIRPERSON NICHOLS:  Thank you.

14           We have Bob Hoffman, Joseph Lyons, and Wendy

15  Mitchell have been added to the list.  Bob Hoffman

16  followed by Joseph Lyons and Wendy Mitchell.

17           MR. HOFFMAN:  Good afternoon.  And thank you for

18  giving me the opportunity to speak on this.

19           I'm Bob Hoffman with Dock Watts, LLC, and we've

20  been watching shore power development since 2004.  And I

21  was one of the 170 people that participated with Mike

22  Waugh early on several informal meetings just sharing our

23  knowledge.

24           We are going to be involved in the implementation

25  of shore power, so we support this process.  Originally,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           261

 1  we were hoping for a market-based solution that actually

 2  could come up with emission reduction credits or other

 3  ways to achieve that.  But I see this is the right way to

 4  go and we support it.

 5           One thing that wasn't clearly mentioned in a lot

 6  of the reporting and in the rule now is that shore power

 7  provides a measurable means of measuring emission

 8  reductions.  The electric meter, every megawatt hour or

 9  kilowatt hour actually measures so many pounds or tons of

10  emission reduction.  So I would encourage part of the

11  implementation which may be a later phase to actually show

12  that the results of this good work that the metered

13  delivery, whether it's from distributed generation or from

14  to grid itself, that would be able to measure the tons

15  reduced of NOx, PM, and CO2.

16           As far as the grid, the reason I got up to speak

17  is when I heard early on about the grid interruption and

18  what that will mean, and that caused me to think about two

19  topics.  One is that I believe as Mr. Garrett said earlier

20  that there should be a variance or some exemption if the

21  grid is actually interrupted or not able to provide the

22  power.  Utilities themselves are power generators and

23  that's call a force de jour and on some contractual

24  commitments they're giving a pass until force de jour can

25  be cured.  Typically a grid reduction would last for just


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           262

 1  hours or no more than a day or so.

 2           Utilities interrupt our homes and other

 3  refrigerators.  So I think if there is interruption caused

 4  by something outside of the ship or terminal operators'

 5  control, they should be given a pass.

 6           The other thing -- and this is something we at

 7  Dock Watts have been thinking about, because I come out of

 8  the utilities industry.  And there are parallel efforts

 9  going with greenhouse gas, with CARB, with the PUC and

10  that deals with the electric market, not only how we can

11  collectively reduce greenhouse gas emissions, but how we

12  can improve reliability of the grid.  And maybe there

13  should be consideration that if on occasion there's a grid

14  emergency or a stage one or two alert where it was facing

15  rolling blackouts that the suppliers of grid power be

16  allowed to interrupt that supply and allow the ships to

17  power up for a brief few hours.  Maybe a few hours per

18  year.  That would help improve resource adequacy as well

19  as part of the utilities response measure.  So that's

20  something that maybe should be considered down the road as

21  something that the California ISO would very much welcome.

22           And finally, even though searching as Mr.

23  Flanagan said, even though grid power is being talked,

24  there are other alternative.  Let the industry, let the

25  stakeholders decide what to do as long as they achieve the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           263

 1  desired emission reduction.  So in searching for the last

 2  remaining market solution, there is no greenhouse gas

 3  attributes and who owns those.

 4           I can tell you in the utility industry there is a

 5  lot of debate on the generation when a utility procures

 6  that power who owns the greenhouse gas attribute that may

 7  be a tradable asset down the road.  I would propose those

 8  greenhouse attributed be owned by the entity implementing

 9  shore power.

10           Those are my comments.  I'm right on the button.

11  Thank you very much.

12           CHAIRPERSON NICHOLS:  Thank you.  Well done.

13           So Joseph Lyons and then Wendy Mitchell.

14           MR. LYONS:  Thank you, Madam Chair.  Joe Lyons

15  with the California Manufacturers and Technology

16  Association, and also here on behalf of the AB 32

17  implementation group, which is a broad coalition of over

18  140 businesses statewide that are constructively engaged

19  in the AB 32 implementation process.  And working to

20  ensure that the California's climate policies are

21  implemented in such a way that is both cost effective and

22  technologically feasible, which of course are the twin

23  requirements of the bill.

24           I have just a few comments.  The gentleman said

25  earlier about the several ocean carriers or have been


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           264

 1  taking proactive steps with regard to shore power, and we

 2  certainly agree with that and hope that's reflected in the

 3  regulations that the Board approves.  Keep that in mind

 4  and sort of try to provide while achieving the goals and

 5  requirements that you're setting out to do, but to do it

 6  in such a way that allows a certain amount of flexibility

 7  for the businesses to comply in their compliance, I should

 8  say.

 9           We also just as general themes, and this

10  certainly applies to this, want to work to ensure that the

11  costs are fairly allocated.  The costs of compliance are

12  fairly allocated and also that with regard to what was

13  mention with market mechanisms.  And that to the extent

14  that it's -- that any chance we can get to achieve these

15  goals and requirements at the same time to lower the cost

16  of compliance as much as possible.  To have the least cost

17  compliance.

18           And I would finally just note one of the

19  gentlemen earlier spoke about -- mentioned jurisdictional

20  issues and port.  And we certainly agree that with regard

21  to this issue it's appropriate for the ARB to have the

22  jurisdiction or service jurisdiction.

23           And he also mentioned the CEQA, and I would say

24  on that as well, you know, certainly the AB 32 clearly

25  places full responsibility on jurisdictions with regard to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           265

 1  implementation to climate policies.  And on CEQA, we

 2  believe strongly that it makes more sense.  It would be

 3  better for our climate policies and our state in general

 4  if we have ARB overseeing instead of having this piecemeal

 5  approach we're now saying with the CEQA debate and things

 6  that are going on.  So thank you.

 7           CHAIRPERSON NICHOLS:  Wendy Michel and then Don

 8  Anair, and that will be our last witness.

 9           MS. MICHELL:  Chairman Nichols and members, my

10  name is Wendy Mitchell.  I'm here on behalf of PG&E to

11  support the regulation and the proposed amendments.

12           I just honestly am here to thank the staff for

13  all their hard work to address our concerns.  We think the

14  proposed amendments achieve our goals of cleaning up the

15  ports.  And thank you very much for all your time and

16  effort.

17           CHAIRPERSON NICHOLS:  Great.  Well done.  Thank

18  you.

19           Mr. Anair.

20           I think you get credits that are bankable on that

21  one.

22           MR. ANAIR:  Good afternoon, Madam Chair, members

23  of the Board.  I'm Don Anair with the Union of Concerned

24  Scientists.

25           I want to just mention our strong support for


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           266

 1  this regulation.  We think this is a groundbraking

 2  regulation which will have national and international

 3  impact, as the ships that are outfitted to comply with

 4  this regulation will plug into systems elsewhere as they

 5  go into place.

 6           But most importantly, it is the local impacts

 7  that we are here today to talk about, and implementing

 8  this will reduce emissions from the largest source of

 9  diesel pollution at the ports.  So we strongly urge you to

10  move forward and adopt the regulation today.

11           I also want to thank staff for responding to some

12  of our concerns that we raised over the past few months,

13  both simplifying the time lines as well as putting the

14  interim targets for 2012 and 2017 to ensure that we're

15  making progress towards these goals.

16           Again, as others have mentioned, we encourage you

17  to look at accelerating that time frame to try to get

18  additional emission reductions from the source because it

19  is so important.

20           Two issues I just wanted to touch on again, one

21  regarding the exemptions and then the technology neutral

22  standards.  In terms of the exemptions, we agree generally

23  with staff that the way the exemptions are written now

24  there would be a small percentage of emission losses from

25  the loss of emissions through that exemption.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           267

 1           We do think that this is sort of based on

 2  assumptions that things are not going to change over time

 3  in terms of the makeup of the shipping fleets, the size of

 4  the shipping fleets.  And so we feel this could be

 5  tightened up a little bit to ensure that we have

 6  protections to make sure these ships are plugging in when

 7  they should be.

 8           For instance, that the current exemption for

 9  container vessels less than 25 visits per year, that

10  applies on a port by port basis.  So a shipping line that

11  has ships coming into port in Oakland and ones that are

12  coming into Long Beach, it's not the combined visits.

13  It's just visits at one port, less than 25 visits at

14  another less than 25.  We think that could be less than 25

15  for all of California ports.  I think that would tighten

16  that up.

17           And as Ms. D'Adamo mentioned earlier, this

18  doesn't have to occur immediately.  It could occur further

19  down the line as the regulation goes into place.

20           And the same could go for the cruise vessels as

21  well.  That's on a per port basis right now.  Limiting

22  that to the total of all port visits in California would

23  also ensure that that's tightened up a little bit.

24           USC supports technology neutral standards, and we

25  are supportive of the standards that are in place in this


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           268

 1  regulation.  My belief is that the staff proposal does

 2  include standards for NOx and PM emissions.  However, I

 3  don't believe that greenhouse gas emissions have been

 4  treated equally in this regulation.

 5           And I just want to point out this is the first

 6  ARB regulation under AB 32 early action measures that the

 7  Board have adopted.  And we would like to see some

 8  protections in this regulation for greenhouse gas emission

 9  backsliding at a minimum to ensure that we move forward

10  and get the emission reductions we all desire.

11           Thank you very much.  And urge you to vote today

12  to move forward with this regulation.

13           CHAIRPERSON NICHOLS:  Thank you very much.

14  Thanks for those comments.  Okay.

15           That is the last witness.  And we can draw the

16  public hearing to a close.

17           Do you, Mr. Goldstene or the staff, have any

18  additional comments that you wish to make at this time?

19           EXECUTIVE OFFICER GOLDSTENE:  Yeah.  Mr. Scheible

20  does.

21           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  I don't know

22  how the Board wants to proceed with the discussion.  I

23  kept track of the various points raised --

24           CHAIRPERSON NICHOLS:  Good.  I was making notes

25  also.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           269

 1           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  --by the

 2  witnesses in the testimony had a little scorecard here.

 3  We can go over them.

 4           CHAIRPERSON NICHOLS:  Why don't you do that

 5  first, and then see what else needs to be asked.

 6           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  I'm use the

 7  proven method of Lynn Terry of taking the easier ones

 8  first.  And then when I get in trouble, staff will have to

 9  save me.  But they've been doing all the work anyway.

10           So there's some easier ones.  I heard one we were

11  urged to ensure the rule will be enforced.  I can promise

12  you we will do that.  And it's sometime before this rule

13  gets going, so we have time to plan the resources and

14  other things.

15           Second, there was a question about what happens

16  for a base line for new fleets.  I think that's fairly

17  easy, because you bring in the new fleet, it's an

18  intensity requirement.  So the new fleet doesn't need a

19  baseline.  It simply needs to show it's reduced its

20  emissions the same as any other operating fleet.  Now, if

21  there's a brand new terminal and new fleet coming in, they

22  might have to have some planning time to make sure the

23  ships can hook up to the existing shore power.  But I

24  think that's not a barrier to entry like it is for a new

25  source.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           270

 1           There was a remark made that ample power is

 2  available, therefore it's not a power problem.  We didn't

 3  see a problem with the power being able to be produced on

 4  the grid.  The problem we saw was that for Long Beach or

 5  San Diego the wires from the power plants and the

 6  sub-stations to the port needed to be put in line.  And

 7  that's a process you have to work through the utility.

 8  You have to go through neighborhoods potentially.  You do

 9  have to do CEQA.  That's part of a long planning period

10  for places like Long Beach and San Diego.  But we agree

11  the power's available.

12           Then we get into the issue of the number of ships

13  in the fleet.  The industry trend has been to consolidate.

14  So unless they change dramatically, you're going to have,

15  you know, the same large fleets operating in the future as

16  now.  And staff is looking into making sure that

17  regulation can't be gamed through ownership or some other

18  method.  That if it looks like a ship coming from XYZ

19  container company, that it is counted in our reg as a ship

20  from that company, regardless of the ownership, which

21  could be very -- as we found out from this ship that hit

22  the bridge in the bay area, quite difficult to figure out.

23           So we're going to put together a regulation that

24  deals with that.  And if it isn't working, we'll come back

25  to you and say here's what it takes to work.  I think we


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           271

 1  have -- a question do you want to lower it by number from

 2  25 to 12 in the future or fewer visits by cruise ships I

 3  think is a policy call.  But we can probably re visit that

 4  later as we see how it's working out.

 5           There's a real policy issue on global warming

 6  gases.  We put this regulation together, and we included

 7  it as AB 32 because it gets real benefits.  We're sure

 8  it's going to get real benefits.  And we want to claim

 9  those.  And it's legitimate to do so.

10           You notice we didn't give you cost and give you a

11  technology assessment because they are co-benefits.  And a

12  question comes down to there are some potential options of

13  technologies that wouldn't get those benefits.  We don't

14  think they would subtract substantially from the

15  regulations effectiveness.  But do we want to rule them

16  out as part of the regulation?  Or do we want to say, no,

17  we think that since this is being done primarily for NOx

18  and PM control, we are going to allow someone to use those

19  options, even though they won't deliver the benefits.

20           This is no different than, for example, the

21  example I used is if someone develops a technology that

22  you can pull alongside the ship and collect the emissions

23  and put it through an SCR and a particulate collection

24  system, it will be -- it could be very effective in

25  controlling NOx and PM.  It could be the cost effective


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           272

 1  option.  It will not get the greenhouse gas benefits.

 2           CHAIRPERSON NICHOLS:  I have a view on this, but

 3  let's table that for a minute.

 4           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  I think it's

 5  a policy call and the Board needs to discuss.

 6           CHAIRPERSON NICHOLS:  What about the question of

 7  whether we should be regulating the terminals versus the

 8  ports as a whole?  Obviously, the South Coast wants us to

 9  regulate the whole port and so does PMSA.

10           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  We debated

11  this intensely as we went around.  We couldn't figure out

12  how to regulate the port.  And we decided that we needed

13  to regulate the ships and the ship operators.  Many times

14  they and the terminals are either the same or so closely

15  related it doesn't make any difference.

16           But in reality, unless the port and the terminals

17  and the ship operators work together to make this work,

18  and we think we at the local districts have to do it, too,

19  we think we have the right mix here.  And we do agree with

20  the witness's suggestion that we need to commit to make it

21  clear what the terminal operator has to do in order to

22  fulfill their commitment and that we need to work to

23  expedite that process.  But we think we have the

24  regulation in the best possible place.

25           I don't know if legal wants to opine on that or


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           273

 1  not.

 2           CHAIRPERSON NICHOLS:  Probably not.  I'm looking

 3  at them, and they don't seem eager to jump in.

 4           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Okay.  I'm

 5  getting to the fundamental last, which is the accelerated

 6  schedule.

 7           Also we were asked to deliver the rule for the

 8  remaining ships as quickly as we can.  And hopefully next

 9  year, we'll do that.  It may not be this easy because the

10  cost effectiveness for those ships for cold ironing is

11  going to be far worse than for these.  And we decided to

12  bring you this group of vessels first, because it was the

13  most attractive case.  But we'll do the analysis and try

14  to figure out how to maximize the emission reductions.

15           I'm down to a couple now.  One is another policy

16  call, which is the South Coast and others are urging us to

17  require better control in the early years from sources

18  that would use distributive generation.  The Bay Area

19  district didn't raise it, but actually the Bay Area folks

20  were saying you know this is a big improvement over the

21  diesel engine.  You don't need to push it that hard.

22  Allow some flexibility in the early years and our judgment

23  was to sit again a floor saying you got to do at least

24  this well and then by the time 2014 comes you have to

25  clearly put on BACT and if a local district wants to be


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           274

 1  more stringent than that I think that's their prerogative.

 2  But we chose not to make the call.

 3           CHAIRPERSON NICHOLS:  And again that's sort of in

 4  the interest of trying to level the playing field here

 5  between the shore power and the alternative.

 6           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  And allow the

 7  alternative a chance to demonstrate they work and they're

 8  financially viable and they can go ahead.  And in the

 9  interim you're still getting emission reductions that you

10  otherwise might not get.  And there's a big benefit.  So

11  there's always that trouble.  Do you settle for something

12  that gets you 85 percent of the NOx that you want that

13  gets you virtually all of the PM benefits that you want?

14           But again, it's a call of where do we -- what do

15  we set as a floor and how much discretion do we want to

16  allow the district?  That's a policy call.

17           I think we're at the issue now which is the

18  accelerated compliance schedule.  We've always looked at

19  this as the most likely compliance route for most of the

20  terminals and most of the ports have been to go to

21  grid-based power.  We have not in any way diminished or

22  lightened up on the compliance schedule for that.

23           Our most recent proposal actually strengthens it

24  in a number of ways.  It requires that the ships get

25  50 percent of visits and 50 percent of load switched over.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           275

 1  We added an interim date in 2015.  So we accelerated that.

 2  We do not think that it's sustainable to have a rule that

 3  went to 20 percent -- everybody has to get a 20 percent

 4  emission reduction and 2010 or a 40 percent in 2012.  Our

 5  quick analysis is that less than a quarter of the

 6  terminals have a shot at the 2010 date, and probably only

 7  a third or so to a half have a shot at the 2012 date,

 8  given the likely time -- if they're to use grid power.

 9  They have to use some sort of hybrid, and that didn't pass

10  any of our cost analysis.  We think that would be a very

11  difficult route.

12           We do believe we should go in and work with each

13  party to say how do we get you there as fast as we can.

14  We have some bond money that might help you do that and

15  make it attractive for you.  It could be used under either

16  option that they take.  And we think that actually in L.A.

17  and Long Beach, most of those reductions work for whether

18  we have a rule or not.  But if we think that if we put it

19  in the rule and said each and every terminal has to do it,

20  we wouldn't be successful.  It wouldn't be successful if

21  we said each and every port had to do it.  The port of

22  Long Beach we do not think can meet the 2010 goal.

23           So that's our assessment on that one.  We think

24  we're getting it done as fast as we can, and we are

25  willing to use other mechanisms to accelerate the emission


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           276

 1  reduction.

 2           CHAIRPERSON NICHOLS:  So just talk more about how

 3  you intend to work with these ports and the terminal

 4  operators to get these emission reductions actually

 5  underway.

 6           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Bob, how are

 7  you going to do that?

 8           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  I'm

 9  going to punt to Mike Waugh.

10           CHAIRPERSON NICHOLS:  They have pictures of all

11  of you guys up on the walls at these places.  I know the

12  pin-up favorites.

13           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  I

14  think the key is the compliance plans that are required in

15  2009.  And that is something that we're going to have to

16  work very closely with the terminal operators, the ports,

17  and utilities and the other stakeholders to get them in

18  and sit them down.  We've done this a few times in the

19  course of this rulemaking.

20           But it's really obvious -- and I think Mr.

21  Jelenic said that as well.  It's really critical for the

22  ports to look at the entire infrastructure so they know

23  that they have to play a role here.  They know that

24  they're scheduling because there's down time that has to

25  be managed.  And I think bringing all that in and us


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           277

 1  working with them and to see how that comes will not only

 2  ensure that we meet the 2014, but it will also ensure that

 3  we actually get an accelerated implementation of it to the

 4  maximum extent feasible.

 5           And CEQA is not going to be easy, you know.  It's

 6  just not going to be an easy process when you're running

 7  lines through the middle of the city, for example, to get

 8  the infrastructure into the port.

 9           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  We also need

10  to work with the PUC and the regulated utilities to bring

11  some speed to that process to make it clear that it's not

12  a bargaining situation between the captive utility

13  customer and the utility, to speed it up as much as we

14  can.  But this is a big measure.  We need it to work.

15  It's a critical part of our plan.

16           BOARD MEMBER CASE:  Just a further question on

17  that, because I hear clearly an interest in accelerating

18  the compliance.  And I also hear real definitively that

19  some ports will look at grid power.  Understanding the

20  CEQA process, they're looking probably at a minimum of one

21  to two years to get through that process to properly

22  publicly notice, to properly hold hearings, to do all of

23  that outreach that has to happen.  And we do a lot of CEQA

24  review as local elected officials, and it just doesn't

25  move quickly.  Even if some groups are wholeheartedly in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           278

 1  support, there's always one or two that want to look at it

 2  and adjust and it figure that out.

 3           But is there an opportunity anywhere for those

 4  that have capacity to move quicker, finding some ways to

 5  reward that or incentivize that?  Because even, you know,

 6  maybe some areas aren't going to move as fast as others

 7  depending on their circumstance and what else is out

 8  there.  But I'm thinking in terms of the number of people

 9  who live by any of these ports and how their health is

10  truly impacted.  It's such a huge amount of pollution

11  nearby to where they live and their children live.  Is

12  there any opportunity there?  That's the one remaining

13  question for me.

14           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Two things.

15  There's clearly an opportunity in terms of incentive

16  funding to say, the sooner you get it done, the more

17  likely you are to qualify for funds where the state can

18  pay a portion of the infrastructure cost on the pier.

19           And on the second issue on health, I just want to

20  say, remember this source is being regulated twice right

21  now.  The difference is we're getting about a 75 percent

22  risk reduction from the rule that we are currently

23  applying and will apply greater through 2010 on the fuel

24  side.  And we're getting the next 75 percent from this.

25  So the early years we're talking -- it's not like we're


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           279

 1  losing a third of the benefit in early years of the net

 2  program.  We're losing a few percent.

 3           So that's why we think it's not good that it's

 4  going to take more time, but still the community is

 5  getting great benefits from the combination.

 6           CHAIRPERSON NICHOLS:  It's important to remember

 7  these are coming on top of recently adopted and going into

 8  effect rules.  And I think we don't always make that

 9  clear, because we do these things one rule at a time.

10  Yeah.

11           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  And tomorrow

12  you'll get the chance to do even more for the community

13  with the port trucking rule that we propose to implement

14  almost fully for PM by 2010.

15           CHAIRPERSON NICHOLS:  It might be useful for all

16  of us and the stakeholders to put together some kind of a

17  fact sheet just to kind of give people a sense of the

18  total picture of the new programs that are out there

19  relating to the ports.  I see nodding from the

20  communications director.  So that's good.

21           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  As you know,

22  we don't have unlimited staff with unlimited energy.

23  We're trying to bring you another rule that's going to

24  have even larger benefits, which is the fuel rule for the

25  main engines.  So we're delivering --


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           280

 1           CHAIRPERSON NICHOLS:  So what are you guys

 2  wasting time on this for?

 3           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  There's

 4  always the weekend unfortunately.

 5           CHAIRPERSON NICHOLS:  Thank you for that.

 6           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  That

 7  covers -- the only other issue I heard was should we have

 8  something when you arrive at the dock and you need to hook

 9  up, you have to do it as soon as possible.  I think we

10  could put a provision in like that.  The ship operators

11  have a big incentive to hook in, because they only get

12  credit for the hours they're hooked up.  And our

13  reluctance to include is it's not very enforceable.  It's

14  enforceable when you have a known window and you exceed

15  the time or meet the time.  But when it's did you make the

16  best efforts if it's there, I don't know if that makes a

17  whole lot of difference.

18           CHAIRPERSON NICHOLS:  No, but it could cause

19  mischief at some point.  I can understand the reluctance

20  to see the language actually put into the rule.

21           CHAIRPERSON NICHOLS:  All right.  Additional --

22  yes, Supervisor Hill.

23           SUPERVISOR HILL:  I do.  Thank you, Madam Chair.

24           And thank you, Mike, for answering most of the

25  questions.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           281

 1           I just want some clarification on a couple.  The

 2  greenhouse gas backsliding, you indicated there may not be

 3  the benefit derived from some of this different technology

 4  that could be used, but that doesn't mean it would be

 5  backsliding I guess is what I -- unless I'm missing

 6  something.

 7           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Well, what I

 8  call backsliding.  If you put add-on controls, you haven't

 9  reduced the emissions from the source.  And the add-on

10  controls are going to use some energy in order the reduce

11  the NOx and the PM.  So you've increased fuel use, but

12  you've gained a big criteria pollutant improvement.

13           And I think our view is, you know, when you do

14  that, that's great.  We need the local health benefits.

15  And we've lost a small amount of greenhouse gas benefit in

16  that particular instance.  We just have to make that up

17  elsewhere.

18           And the question here when you have a technique

19  and you say allow the choice for that when the source

20  operator decides that's most cost effective to get -- the

21  primary thing this rule is designed to do or should we

22  say, no, you know, we're going to only allow you to use

23  your choices of things that are either neutral or net

24  benefit for greenhouse gases.

25           CHAIRPERSON NICHOLS:  I think we could have a


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           282

 1  discussion at this point actually if people don't mind

 2  about the CO2 issue.

 3           Maersk testified that they wanted to use some

 4  sort of an on-ship control throughout their fleet.  And

 5  I'm assuming that that would automatically mean if it was

 6  something they're doing to the ship that that is going to

 7  cause them to burn more fuel; right?  It's not going to

 8  make it more efficient.

 9           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Yes.  But

10  that also has a side benefit of not only operating at dock

11  but when the ship is underway and getting ready to do so,

12  there's even potential for even greater benefit.  So

13  different --

14           CHAIRPERSON NICHOLS:  That's a life cycle kind of

15  issue, isn't it?

16           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Right.

17           CHAIRPERSON NICHOLS:  Okay.  I was worried about

18  that.

19           SUPERVISOR HILL:  Another question when we're

20  talking about the number of visits that a ship makes or a

21  fleet makes.  If a ship came into a port a few times only,

22  but did it regularly, but didn't meet the threshold, it

23  would not be included in this; is that true?  I mean, I

24  would think if it's a regular visit, it falls under that

25  we should --


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           283

 1           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  The ship

 2  visit regardless of whether it's once or ten times, it's

 3  in a fleet, is included in the fleet.

 4           SUPERVISOR HILL:  I was thinking more of

 5  passenger -- the issue of cruise ships that may come in a

 6  few times or fall under the threshold within a fleet --

 7  you know, that particular fleet, but doesn't do it.  Are

 8  there examples of that or cases where that could happen?

 9           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  Yeah.

10  I think with regard to the cruise ships, there are an

11  occasional fleet.  For example, there's a Japan line that

12  showed up in California one time, and that would be a

13  fleet that would --

14           SUPERVISOR HILL:  I didn't mean one time.  I mean

15  one time every six months or you know they're taking a

16  trip every year going around -- I guess I'm just looking

17  for that regular visit that probably is not --

18           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  I

19  think still from a cost effective standpoint that even if

20  it comes regularly but not regularly enough to come five

21  times, then say it shows up once a year, twice a year,

22  three times a year, it's still at the point where it's not

23  cost effective to use shore power.

24           One of the things that we're finding in the

25  cruise industry and one of the provisions we have in our


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           284

 1  proposal here goes back to the fact that if you have the

 2  ability to plug in both from the ship side and the berth

 3  side, you will.

 4           So what we're finding is sometimes you may be

 5  required to do that because you're part of a fleet that

 6  shows up in San Francisco, and then when you come down to

 7  San Diego for that occasional visit, because you have the

 8  ability, you will plug in.  And we think we're going to

 9  capture -- especially in the cruise industry as these

10  ships are redeployed, they're all capable of plugging in,

11  we are going capture a lot of those ones and twosies that

12  visit for that reason.

13           SUPERVISOR HILL:  One for just a clarification,

14  Mike.  You talked about the fleets -- this specifically

15  applies to the port of Oakland where the new shipping line

16  comes in at 2012 or 2014 and in terms of Calculating the

17  reduction target and how that would work for future

18  emissions.  You feel that's not going to be a problem.

19           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Well, it

20  would have the same calculation method as an existing

21  fleet.  So if they made 100 visits, they have to plug

22  in -- in 2014, they'd have to plug in 50 of those -- at

23  least 50 of those visits and have to make sure those 50

24  accounted for at least 50 percent of the load.  So the

25  only problem comes down to if the business came so quickly


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           285

 1  that they could not somehow retrofit the ships and they'd

 2  have to come on to some sort of compliance schedule.

 3           CHAIRPERSON NICHOLS:  Presumably the port of

 4  Oakland is out soliciting clean vessels.

 5           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  They're going

 6  to know what the obligation is.  They would incorporate

 7  that into their decision to come.

 8           We're not trying to put up a new barrier for

 9  fleet composition to change or whatever.  We're trying to

10  make for every fleet that's there, whether an existing

11  one, an expanding one or new one meets the same basic

12  requirement.

13           SUPERVISOR HILL:  Thank you.

14           CHAIRPERSON NICHOLS:  Ms. D'Adamo followed by

15  Supervisor Roberts.

16           BOARD MEMBER D'ADAMO:  Just following up on the

17  25 visits.  First of all, I want to make sure I understand

18  this.  Is it 25 total visits to California, all ports in

19  California, or 25 per port?

20           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:  It is

21  25 per port.

22           BOARD MEMBER D'ADAMO:  Then I'm even more

23  uncomfortable than I was earlier on this.  I think we

24  should -- and I hate to be the one throwing out there

25  exactly what it ought to be -- but reduce it so that it's


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           286

 1  25 total for California.  Perhaps even in a combination

 2  with a phase down or phase out in the out years.  Because

 3  I think we're assuming that this regulation is going to

 4  take off in other areas of the world.  And by 2020,

 5  hopefully it wouldn't be such a burden.

 6           So I'd welcome comments from staff or other Board

 7  members as to what that actual number and date ought to

 8  be.  But I'm uncomfortable with that high of a --

 9           CHAIRPERSON NICHOLS:  Do you want to comment on

10  the feasibility?

11           PROGRAM ASSISTANCE SECTION MANAGER WAUGH:

12  Currently, the way that the vessel fleets are operating

13  even with the current proposal we would get 94 percent, 95

14  percent have all vessel visits.

15           I think the concern comes from whether or not you

16  get smaller fleets because of splintering.  Like Mike

17  said, there's more of the direction of consolidation.

18           So what we have again based on the data, even

19  when getting roughly half the fleets in these three ship

20  categories, we're still getting 95 percent of the vessel

21  visits.

22           BOARD MEMBER D'ADAMO:  I understand.  But as far

23  as community impact, a visit is a visit.  I hear what

24  you're saying.  In most instances, it's an occasional

25  visit of one or two.  If that's the case, it shouldn't


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           287

 1  matter if we reduce the amount.  I just don't know what

 2  the threshold ought to be in total.

 3           CHAIRPERSON NICHOLS:  What would be the harm be

 4  of redefining it from 25 per port to 25 in California?

 5  That's the question.

 6           SUPERVISOR HILL:  How many more would you

 7  capture?

 8           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Probably

 9  would capture very few more.

10           CHAIRPERSON NICHOLS:  It could capture a few

11  more.  And the negative impact would be?

12           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  The few more

13  it would capture, they would have a very high end cost

14  effectiveness.

15           CHAIRPERSON NICHOLS:  For those small --

16           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  For that

17  particular fleet, because the emission reductions produced

18  per fleet versus their capital costs.

19           Now in all likelihood a container ship or cruise

20  ship is already going to have the capital facility put in

21  at the terminal.  It's going to be the ship side cost.  So

22  if the Board wants to go with a smaller number, we can put

23  that out in the 15-day notice and see the comments on it.

24           CHAIRPERSON NICHOLS:  Okay.  Let's hold that

25  thought.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           288

 1           Supervisor Roberts.

 2           BOARD MEMBER ROBERTS:  Thank you, Madam Chairman.

 3           First of all, I want to thank the staff for

 4  making some of the changes that I was particularly

 5  concerned about that had to do with the unequal timing of

 6  the different tracks that we were going to be available.

 7  I think this is clearer and tighter and I think makes a

 8  lot more sense.

 9           I was concerned also with the 25/5.  The five

10  being the cruise ships and the 25 being the cargo ships

11  with the total visits.  And I felt it should be statewide

12  rather than just the individual ports.  Especially 25 to

13  each port sounds like a huge -- it could be a huge number

14  and could become part of the schedule in the way these are

15  handled.  I would feel far more comfortable if we were to

16  look at those even though it theoretically only affects a

17  small number.  I think that adjustment should be made.  I

18  would heartily support that.

19           CHAIRPERSON NICHOLS:  Okay.  Additional questions

20  or comments from Board members.  Ms. Berg.

21           BOARD MEMBER BERG:  I just had one on my list

22  remaining and that was the grid emergency issue again

23  dealing with the fact that if the vessel was there willing

24  to plug in but electricity is not available, the fairness

25  and having them make it up.  And if it isn't a big issue,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           289

 1  it's not a problem.  But we've lived through times where

 2  it has been a big issue.

 3           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  We don't

 4  think it's going to be much of an issue because it occurs

 5  so infrequently.  But on the other hand, if the Board

 6  wants to say, you know, on a fairness if the vessel is

 7  equipped to plug in, they would have plugged in, they

 8  can't plug in because the grid was turned off, we want to

 9  simply say that doesn't count for them or against them.

10  That would not change the regulation to say you were

11  forced off.  We are not going to count the emissions

12  during that forced outage again your compliance.  But if

13  you didn't have that option to plug in, then those

14  emissions counted.

15           If you want us to do a 15-day change like that,

16  that's your call obviously.

17           BOARD MEMBER ROBERTS:  If I could just weigh in

18  for a minute.  We just went through one of these

19  situations.  And in fact, all of the Navy vessels that are

20  all equipped, all had to unplug so that we would have the

21  power during the recent fire storms.  So these things do

22  occur.  And surely if we would have had other ships

23  visiting, we would have done the same thing for them.

24           CHAIRPERSON NICHOLS:  I think that's a very valid

25  point.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           290

 1           I didn't actually formally say that I had closed

 2  the record, but I guess I should do that; right?  The

 3  record is closed at this point on this item.  And that it

 4  will be reopened again when the 15-day notice is issued.

 5  So any comments that were to come in from now to the time

 6  of the notice would not be considered.  But once the

 7  record is reopened, the public can comment on any of the

 8  proposed changes that may come forward at this point.  And

 9  that will be included as part of the Statement of Reasons

10  for the regulation.

11           I think before we take action on amendments and

12  motions that we should do the ex parte statements.  So

13  I'll start down at your end, Mr. Roberts.  I usually go

14  the other way.

15           BOARD MEMBER ROBERTS:  I have one meeting.  On

16  November 29th, I had a meeting with Scott Sadler from

17  Oakland Port Authority and Dana Markle who's with Clean

18  Air Logix.  And we discussed the scheduling and the use of

19  alternative technologies.

20           CHAIRPERSON NICHOLS:  Great.

21           BOARD MEMBER SPERLING:  Yes.  I had a telephone

22  call with Bonnie Holmes-Gen; Diane Bailey, NRDC; John

23  Kaltenstein, Friends of the Environment; and Rupal Patel,

24  Communities for Clean; Irvin David, Tim Carmichael, Don

25  Anair from various organizations about some of this.  It


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           291

 1  was a fairly brief call, but it reflects the conversations

 2  that had been had here.

 3           I don't have it recorded here, but I had another

 4  conversation with a group of people.  And I guess I should

 5  have written it down.  I can provide it later from the

 6  ports, from the Whitmer -- the company doing the Whitmer

 7  technology and PG&E.  But the discussion just a few days

 8  ago.  But the discussion was before the revisions were

 9  made.  And I think they've reflected a different

10  discussion then what is going on here because of the

11  changes.

12           CHAIRPERSON NICHOLS:  Okay.  Thank you.

13           Supervisor Case.

14           BOARD MEMBER CASE:  On November 28th, I had a

15  conference call with Bonnie Holmes-Gen with the American

16  Lung Association; Devra Wang with NRDC; John Kaltenstein,

17  Friends of the Environment; Rupal Patel, Communities for

18  Clean; and Don Anair of the Union of Concerned Scientists.

19           On November 28th, I met in my office in Fresno

20  with Rick Lehman and Scott Sadler in regards to

21  representing the Oakland Port Authority.

22           And on December 3rd, I had a telephone call with

23  Bob Riding with PG&E.  And the testimony in those meetings

24  were reflective of today's testimony.

25           CHAIRPERSON NICHOLS:  Ms. Riordan.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           292

 1           BOARD MEMBER RIORDAN:  Yes.  I had two telephone

 2  conference calls.  First, on November 28th, with Candice

 3  Kim from Coalition of Clean Air; John Kaltenstein from

 4  Friends of the Earth; and Rupal Patel from Communities for

 5  Clean Ports.  That conversation mirrored the testimony

 6  provided today.

 7           As well as yesterday I spoke to the port of Long

 8  Beach, Robert Kanter and his staff.  And within the letter

 9  that we have received, the conversation mirrored that.

10           CHAIRPERSON NICHOLS:  Okay.  I have four items to

11  report.  On November 20 was a busy day for the

12  environmental groups.  And I met with large number of them

13  also.  Bonnie Holmes-Gen, Dennis Hall, Bill McGavern,

14  Diane Bailey, Devra Wang, Camille Kustin, Kathryn

15  Phillips, Raphael Aguilera, Rafael Pizarro, Candice Kim,

16  Wendy James, and Don Anair.  And their as a group

17  reflected the same points they've made here today.

18           On December 4th, I spoke with T.L. Garrett and

19  Mike Jacob, Shaudi Falamaki, Chuck Cole, PMSA and

20  Kahl-Pownall Advocation.

21           On December 5th, I participated in a conference

22  call with Scott Sadler from Lehman Kelly English and

23  Sadler; Matt Davis, Howard Berman, Chris Ferrera and Wendy

24  Mitchell, all concerning the changes that had been made

25  with the rule and they expressed their support for changes


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           293

 1  that had been made, which was great.

 2           And then this morning I met here before the Board

 3  meeting with representatives of Maersk.  And they

 4  explained in more detail than they did in their testimony

 5  but the same basic point.  They're concerned that the

 6  timing for those who are going to go with the alternative

 7  to shore power is too strict for them.  They're worried

 8  about whether they're going to be able to make it.  They

 9  said they would comply no matter what.  But they were

10  concerned they would be pushed harder than they were

11  comfortable with on being able to demonstrate that the

12  technology they're working on is really going to work.  So

13  that was it.

14           SUPERVISOR HILL:  I have on November 26th a call

15  with Diane Bailey and Devra Wang of NRDC; Bonnie

16  Holmes-Gen of American Lung; Irvin David, Sierra Club; and

17  John Kaltenstein from Friends of the Earth.

18           December 3rd, a call with Pacific Merchant

19  Shipping Association; T.L. Garrett, PMSA; Mike Jacob,

20  PMSA, Shaudi Falamaki, Kahl-Pownall; and Chuck Cole from

21  Advocation.

22           And then there was a meeting I had -- I don't

23  have the date -- with Matt Davis and others from the port

24  of Oakland to discuss the issues that they raised today

25  and had been raising before.  So those are mine.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           294

 1           BOARD MEMBER D'ADAMO:  On November 27, I

 2  participated in a conference call with the NRDC

 3  representatives Diane Bailey and Devra Wang; and John

 4  Kaltenstein, Friends of the Earth.

 5           On December 5th, I participated in a conference

 6  call with Pacific Merchant Shipping Association; T.L.

 7  Garrett, PMSA; Mike Jacobs, PMSA; Shaudi Falamaki,

 8  Kahl-Pownall; and Chuck Cole from Advocation.  And the

 9  comments that they provided on the phone were similar to

10  the testimony they provided today.

11           BOARD MEMBER BERG:  On November 17th, I met with

12  Candice Kim, Coalition for Clean Air at Ellis Paint

13  Company.

14           On December 3rd, I had a phone call with Pacific

15  Merchant Shipping Association.  On that phone call was

16  T.L. Garrett, Mike Jacobs, and Shaudi Falamaki make with

17  K-P Public Affairs.

18           On December 4th, I had a phone call with the port

19  of Long Beach with Robert Kanter, Director of

20  Environmental Affairs and Planning and his staff; Thomas

21  Jelenic and Ari Steinberg and Dominica Davis.

22           CHAIRPERSON NICHOLS:  Okay.  Thank you.  Do the

23  Board members want additional time to review the

24  resolution, or are you ready to proceed with any proposed

25  amendments?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           295

 1           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  We

 2  have one proposed resolution be it further resolved that

 3  we would like to add to the proposed resolution.

 4           CHAIRPERSON NICHOLS:  All right.

 5           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  Be it

 6  further resolved that the Board direct the staff to work

 7  with terminal operators, ports, local utilities, and other

 8  stakeholders to accelerate the implementation of this

 9  regulation through coordinated planning, effective use of

10  incentive funds, and expedited environmental planning

11  processes.

12           CHAIRPERSON NICHOLS:  Without objection, I think

13  that will be accepted.  All right.

14           BOARD MEMBER D'ADAMO:  Madam Chair, perhaps we

15  should just put a motion for the resolution on the table.

16  And so I propose adoption of Resolution 07-5-7.

17           BOARD MEMBER ROBERTS:  I'll second.

18           CHAIRPERSON NICHOLS:  It has been seconded.

19           BOARD MEMBER D'ADAMO:  And then I know there are

20  a number of things discussed.  But I would propose that we

21  limit the exemption of 25 carriers and five cruise ships

22  to total visits in California.

23           BOARD MEMBER ROBERTS:  I would second that.

24           CHAIRPERSON NICHOLS:  I see a second to that.

25  Can I see a show of hands --


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           296

 1           CHIEF COUNSEL JENNINGS:  One clarification on

 2  that.  This probably goes without saying, but it would be

 3  to ports subject to the regulation in California.

 4           BOARD MEMBER D'ADAMO:  Okay.

 5           STATIONARY SOURCE DIVISION CHIEF FLETCHER:  If I

 6  can add or just request a clarification that I would like

 7  to have the flexibility to tailor that requirement in a

 8  way that makes sense and that we don't end up with a

 9  single berth and a single ship coming that ends up somehow

10  getting electrified.  So I think their intent is to make

11  sure that it deals with the regular visit of ships to

12  California ports.

13           BOARD MEMBER D'ADAMO:  That's fine.

14           CHAIRPERSON NICHOL:  Do I see enough nodding to

15  indicate that's going to be accepted?

16           BOARD MEMBER KENNARD:  I actually have a

17  question.  I would like to see kind of the economic cost

18  benefit analysis on such an expansion of this regulation

19  before we go forward with -- this could be a significant

20  change.  And I heard a lot of the public comments saying

21  what about two versus 25.  And I don't know that I

22  personally feel I have enough information to say it should

23  be one visit versus 25 or five.  I just don't know that we

24  have enough information and the analysis hasn't been done.

25  And Mr. Scheible had indicated that we're just really


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           297

 1  touching are the margins here in any event.

 2           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Yes.  And we

 3  can do that as part of the 15-day process.

 4           CHAIRPERSON NICHOLS:  Because you can extend the

 5  work you've already done.

 6           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  It's going to

 7  be on the ship side of things mostly, because the

 8  terminal -- the passenger terminals are going to have the

 9  ability to plug the ship in.  It's the matter of the ship

10  cost.

11           CHAIRPERSON NICHOLS:  So you could recommend that

12  if the Board goes ahead with that amendment that you would

13  do the analysis as part of the 15-day process and it would

14  include it at that point.  Okay.

15           BOARD MEMBER RIORDAN:  Madam Chair, there was an

16  item that Member Berg brought up, and I think that ought

17  to be included.  Whereby a ship not be penalized or a

18  vessel not be penalized when power is not available for

19  some unusual reason, you know, emergencies, whatever we

20  want to call it.

21           CHAIRPERSON NICHOLS:  That was -- the suggestion

22  on that I think has to do with how long that availability

23  might be.  Because I think we indicated that if it was a

24  matter of a few hours, it wouldn't matter in terms of the

25  overall compliance scheme.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           298

 1           DEPUTY EXECUTIVE OFFICER SCHEIBLE:  Well, if it's

 2  a short time, it wouldn't matter.  If it's a long time, we

 3  have bigger problems how this rule got complied with that

 4  quarter.

 5           So I what I think we can -- again, using the

 6  15-day process, and I would suggest is it would count as a

 7  visit if the ship was willing and would have done it

 8  except for the emergency.  The emissions that occur

 9  because it had to operate its engines won't count against

10  it.  It won't benefit in an emissions sense, but it won't

11  be hurt.  And it won't be hurt on the number of visits.

12  So it should be able to comply right.  It's neutral.

13           CHAIRPERSON NICHOLS:  We have a lot of heads

14  nodding on that.

15           Are there other amendments people wanted to

16  specifically --

17           BOARD MEMBER BERG:  Just a point of

18  clarification.

19           The resolution that staff proposed in working

20  with the ports, that would also lay out the criteria so I

21  could cross that one off my list?  Where we said ARB would

22  assist in establishing plan criteria for the operators.

23  That would be covered in the resolution that staff just

24  read?

25           STATIONARY SOURCE DIVISION CHIEF FLETCHER:


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           299

 1  Actually, we are proposing a 15-day modification that

 2  would provide additional criteria for that planning

 3  process already.

 4           BOARD MEMBER BERG:  Thank you very much.

 5           SENIOR STAFF COUNSEL VERGARA:  That language is

 6  in the resolution before you.

 7           BOARD MEMBER BERG:  I just wanted that point of

 8  clarification.  I'm good.

 9           CHAIRPERSON NICHOLS:  Does anybody feel they need

10  of a voice vote, or can we just proceed -- I mean a roll

11  call vote?  Can we proceed on a voice vote?  Okay.

12           All in favor of adopting Resolution 07-5-7 please

13  say aye.

14           (Ayes)

15           CHAIRPERSON NICHOLS:  Opposed?

16           Very good.  Thank you all for a great piece of

17  work.  Really great to have this done.

18           And we have one more item today.  But I think

19  there is a desire for the break.  How much about giving us

20  until five o'clock even, 5:05.

21           (Thereupon a recess was taken.)

22           CHAIRPERSON NICHOLS:  I think we're ready to go.

23           This is an item that we placed on the agenda in

24  order to consider the options for responding to a Public

25  Records Act request for information regarding our zero


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           300

 1  emission vehicle, or ZEV program.  And the information

 2  that's being sought is the ZEV credit data, and it's being

 3  sought for every manufacturer that's subject to the rule.

 4           At our November meeting three weeks ago, Tim

 5  Carmichael of the Coalition for Clean Air expressed

 6  concern that the information still had not been provided,

 7  so we asked to put the matter on the agenda for today's

 8  meeting.

 9           And I'm going to ask you to introduce this item,

10  Mr. Goldstene.

11           EXECUTIVE OFFICER GOLDSTENE:  Thank you, Chairman

12  Nichols.

13           Exactly a year ago, the ZEV Alliance, a coalition

14  of environmental groups, submitted a Public Records Act

15  request that ARB provide the ZEV credit data we have for

16  each auto maker.  This is the information about how many

17  and what kinds of credits a manufacturer has generated or

18  acquired to be used for compliance with the annual ZEV

19  obligation that started in the 2005 model year.

20           All of the ZEV credit information ARB has for

21  individual auto makers has been derived from submittals by

22  the manufacturers, in most cases under a claim of trade

23  secret.

24           Our legal staff asked each auto maker claiming

25  confidentiality to provide detailed demonstration why the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           301

 1  company believed that the data are exempt from disclosure

 2  under the Public Records Act.  After reviewing these

 3  submittals, the legal staff concluded that the

 4  manufacturers had adequately demonstrated that the ZEV

 5  credit data were trade secrets that were exempt from

 6  disclosure.  The ZEV Alliance was notified of this in

 7  January and February of this year, and only redacted

 8  materials were provided.

 9           At the May 2007 Board meeting, you heard the

10  report of the ZEV expert review panel and staff's status

11  update on the ZEV regulation.  Members of the ZEV Alliance

12  expressed concern that the manufacturers' ZEV credit

13  information was being withheld.  They believe that ARB's

14  failure to release the data precluded their fully informed

15  participation in the ZEV rulemaking process.  This was

16  because the vehicle mix and individual auto makers who

17  actually produce to comply with the existing provision or

18  potential amendments depended on the auto maker's ZEV

19  credit status.

20           The resolution you adopted at that Board meeting

21  directed the staff to take a broad legal view regarding

22  the disclosure of credits issue in order to achieve a

23  transparent public process.

24           As a result, our legal staff invited the ZEV

25  alliance and the manufacturers to provide additional


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           302

 1  analysis in support of their respective positions.  Our

 2  lawyers considered the issues carefully and released a

 3  report this past Monday.

 4           Today, you will hear the recommendations of Tom

 5  Jennings, our Chief Counsel.  I think you'll see this

 6  suggest presents some difficult and challenging issues,

 7  some of which are strictly legal and some of which have

 8  important policy components.

 9           Although you're be hearing the advice of our

10  Chief Counsel on a matter that may very well lead to

11  litigation, we believe it is appropriate for the Board to

12  conduct the discussion in open session.  This will ensure

13  that the public has the opportunity to provide input and

14  to observe any deliberation the Board engages in.

15           CHAIRPERSON NICHOLS:  Thank you very much.

16           Mr. Jennings, I bet you weren't expecting such

17  excitement at your last Board meeting.

18           (Thereupon an overhead presentation was

19           presented as follows.)

20           CHIEF COUNSEL JENNINGS:  Maybe I retired a month

21  too late.

22           Next slide please.

23                            --o0o--

24           CHIEF COUNSEL JENNINGS:  This slide just outlines

25  the role of ZEV credits in the ZEV regulation.  As you


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           303

 1  know, there are three levels of vehicles:  Gold, silver

 2  and bronze, which generate credits.  The amount of credit

 3  depends on the category, characteristics, and model year

 4  of the vehicle and then those credits can be banked and

 5  traded.

 6           Then for each model year starting with 2005,

 7  manufacturers use credits to meet their obligation --

 8  their ZEV obligation.  And in many instances there's only

 9  certain kinds of credits that can be used to meet certain

10  elements of the ZEV requirements.

11           And the regulation also provides choice between

12  base compliance path and alternative path.  And whether a

13  manufacturer chooses the alternative path depends to some

14  extent on how many gold ZEV credits the manufacturer has.

15           Next slide.

16                            --o0o--

17           CHIEF COUNSEL JENNINGS:  This slide just lays out

18  what Mr. Goldstene went over on how we address the issue

19  after we received the request from the ZEV Alliance.

20           And we can skip to the next slide.

21                            --o0o--

22           CHIEF COUNSEL JENNINGS:  Which lays out the

23  language in the resolution from last May in which the

24  Board asked us to take another look at this issue.

25           Next slide, please.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           304

 1                            --o0o--

 2           CHIEF COUNSEL JENNINGS:  Back in June, the legal

 3  staff wrote to both the manufacturers and the ZEV Alliance

 4  asking for additional analysis, if they choose to do so.

 5  We got a letter from the First Amendment Project on behalf

 6  of the ZEV Alliance, a letter from the Pillsbury Firm on

 7  behalf of the large volume manufacturers and from three or

 8  four individual manufacturers.

 9           Next slide, please.

10                            --o0o--

11           CHIEF COUNSEL JENNINGS:  This lays out the

12  principles of the California Public Records Act.  That is

13  a quote from the first section of it.  There's a provision

14  in the Constitution of California that emphasizes the

15  importance of the disclosure of public records.  At the

16  same time, the Public Records Act identifies some specific

17  exemptions to disclosure that State agencies need to

18  follow.

19           Next slide, please.

20                            --o0o--

21           CHIEF COUNSEL JENNINGS:  The main section of the

22  Public Records Act that the manufacturers are relying on

23  is Section 6254.7 of the Government Code.  So the next

24  several slides are going to go over that.

25           And that section has six subsections as you can


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           305

 1  see here.  The first three identity three categories of

 2  information that are declared to be public records by the

 3  statute.

 4           The next section states that with two exceptions

 5  trade secrets are not public records under this section.

 6           E talks about emission data being public even if

 7  it is trade secret.

 8           And F has a provision having to do the use of

 9  data used to calculate emission credits for permit

10  programs.

11           Next slide, please.

12                            --o0o--

13           CHIEF COUNSEL JENNINGS:  We've identified three

14  legal issues in terms of the applicability of this

15  section.

16           And the first one is whether the information is

17  trade secret.  There's a definition in the statute I'm

18  going to go over.

19           The second question is if the data are trade

20  secrets, is the data always exempt from disclosure or does

21  it have to fall into one of the three categories

22  identified in Subsections A, B, and C.  And I'm going

23  discuss that as the second issue.

24           And then the third issue, if this answer on the

25  second one is it does have to fall within those sections,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           306

 1  to analyze whether in fact it does.

 2           Next slide.

 3                            --o0o--

 4           CHIEF COUNSEL JENNINGS:  Oh, and I want to

 5  mention -- and this is very important.  A couple things I

 6  had meant to mention.

 7           First, under Section 6254.7, if it's exempt from

 8  disclosure, that exemptions is absolute.  And the decision

 9  maker doesn't then do any balancing of public interests.

10           I'm going to talk later on where there's another

11  statute that's pertinent where the Board would be doing a

12  balancing of public interests.

13           And the other thing that I forgot to mention is

14  that in implementing the Public Records Act, the Air

15  Resources Board has adopted regulations.  And one

16  provision of those regulations is that where an entity has

17  submitted information based on a claim of confidentiality

18  and the ARB decides that it isn't exempt from disclosure

19  that we first have to give 21 days' notice to the entity

20  submitting the material to us before we release that data

21  so that they have a chance to seek a judicial remedy if

22  they want to.

23           So now I'm going to talk about whether these data

24  are trade secret.  In the definition of trade secret, you

25  can break it up into five elements.  And these are the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           307

 1  first three.

 2           On the first one, we believe the ZEV credit

 3  information clearly is a compilation of information.  So

 4  it falls within that first category.

 5           The data clearly are not patented, so they fall

 6  within the second category as well.

 7           And then the third category I think is one of the

 8  two somewhat challenging categories, and that is which is

 9  known only to certain individuals within a commercial

10  concern.

11           The manufacturers all submitted information in

12  more or less detail on their efforts to keep the ZEV

13  credit information confidential within their companies.

14  And I don't think there's much question about that.

15           The First Amendment Project asserted that all of

16  these data are available publicly, and therefore the data

17  are not just known to certain individuals within the

18  commercial concern.  And when we certify motor vehicles

19  gold, silver, or bronze motor vehicles, we always identify

20  now in the certification order what credits they're

21  generating.

22           And then the First Amendment Project asserts that

23  one could go to DMV and obtain a lot of information about

24  registration of vehicles.  And combining that information

25  and maybe executive orders that we've issued on


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           308

 1  transportation credits and things like that, one could

 2  figure out pretty well what the ZEV credit status of a

 3  company is.

 4           In some ways, the bottom line is that the efforts

 5  of the auto companies are so strong to try to avoid

 6  releasing this data under the Public Records Act and the

 7  efforts of the ZEV Alliance are so strong in trying to get

 8  the data that I think that's pretty good evidence that the

 9  data is not generally available without resort to this

10  Public Records Act request.

11           So now the next slide is on the last two

12  criteria.

13                            --o0o--

14           CHIEF COUNSEL JENNINGS:  The next one is that the

15  information is being used to manufacture a product.  The

16  vehicle manufacturers make passenger cars for sale in

17  California that have to meet the ZEV regulation.  They

18  need to know their ZEV credit status to make vehicles that

19  comply with the regulation, and I think that that's pretty

20  straight forward.

21           And the last one is knowledge of the trade secret

22  that gives the user an opportunity to obtain a business

23  advantage over competitors who do not know or use it.  And

24  the main point that the manufacturers have made is that

25  their ZEV credit status shows what their upcoming business


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           309

 1  plan is likely to be, about the kinds of vehicles they'll

 2  be certifying and selling, if they are interested in

 3  engaging in a trade with another manufacturer over gold,

 4  silver, or bronze credits.  If the person they're doing

 5  the transaction with knows what their credit status is,

 6  their bargaining position may be different than if they

 7  don't know what their ZEV credit position is.  Do they

 8  have to get these credits to comply with the regulation or

 9  will it just give them a cushion?

10           And next slide, please.

11                            --o0o--

12           CHIEF COUNSEL JENNINGS:  Our conclusion on

13  whether it's a trade secret is pretty clearly that we

14  believe these data do qualify as trade secret, which gets

15  us to the second issue under Section 6254.7.

16           And -- just a second.  Under the second issue,

17  the question is whether all trade secrets are exempt or

18  only those trade secrets that fall within Subsections A,

19  B, or C.

20           And when the section was originally enacted in

21  1971, there were three subsections.  And the first two

22  were the same subsections that are there now identifying

23  two categories of air pollution records as public records.

24  And then Subsection C, which is now D, said trade secrets

25  are not public records under this section.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           310

 1           And it seems pretty clear from that that it is

 2  only an exception from the kinds of information that are

 3  declared to be public under A and B.  As originally

 4  enacted, it was not intended to be a blanket exemption for

 5  trade secrets, even if they had nothing to do with air

 6  pollution or water pollution or anything like that.

 7           And I have to say that this is an issue that we,

 8  the legal office, never really looked at that vigorously

 9  before, but it was raised by the First Amendment Project.

10  And as we looked at it more, we became more convinced it's

11  a very real issue.

12           The section has been amended six times.  Five of

13  the amendments are wholly consistent in our view with the

14  principle that when the Subsection D refers to are not

15  public records under this section, they're only referring

16  to the kinds of documents that are declared under the

17  section to be public records.

18           Next slide.

19                            --o0o--

20           CHIEF COUNSEL JENNINGS:  There is one amendment

21  that's very problematical.  And that is in 1981 the

22  Legislature added this language to what's in Subsection D.

23  And it said it added the second exception, and the

24  exception had to do with data regarding the results -- the

25  answers to standardized tests.  And clearly that doesn't


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           311

 1  have to do with any of the documents declared to be public

 2  records in any other subsection there.  So it raises a

 3  question if Subsection D only refers to trade secrets that

 4  are identified as public under A, B, and C, there would

 5  have been no reason for the Legislature to put that

 6  underlined language in there.

 7           But on the other hand, when you think about it,

 8  is the Legislature's putting that language in there in

 9  1981, does that really reflect an intent to convert what

10  the whole section meant compared to what it meant before

11  that amendment was put in.  That sort of also calls into

12  question what did the Legislature mean by are not public

13  records under this section if things in other sections are

14  relevant as well.

15           So next slide.

16                            --o0o--

17           CHIEF COUNSEL JENNINGS:  When we look at the

18  question overall, we have concluded that we think that

19  trade secrets -- the trade secret exemption only applies

20  to information that's identified in A, B, and C.

21           And just to digress for one moment.  You'll

22  recall in the mandatory reporting rulemaking that we did

23  earlier there was a good deal of information about or

24  testimony about trade secret stuff and emission data.  All

25  of that data clearly does fall within Subsection A.  So


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           312

 1  there is a lot of meaning to Subsection A.  The question

 2  is for us whether the ZEV credit data falls under

 3  Subsection A.

 4           So this slide shows what the first half of

 5  Subsection A and I think the pertinent part.  And it

 6  refers to all information, analyses, plans, or

 7  specifications that disclose the nature, extent, quantity,

 8  or degree of air contaminants where other pollution which

 9  any article, machine, equipment -- don't you love how laws

10  are written -- or other contrivances will produce.  And

11  then after another clause, it says are public records.

12           So I think that it's clear that when it refers to

13  emissions from other contrivances, that would include

14  motor vehicles.  But it's talking about the actual

15  emissions that come out of contrivances and equipment and

16  stuff like that.  And then again when you look back at the

17  mandatory reporting rulemaking, it was all about what are

18  the actual emissions of these facilities.

19           And with the ZEV credits, the ZEV credit is not

20  based on the actual emissions of the particular vehicle

21  model that got certified.  It's based on the certification

22  standard that the vehicle was certified to.  So that all

23  PZEVs, regardless of what the actual emissions of the

24  tested vehicle were, are treated the same.  And all AT

25  PZEVs are treated the same in terms or they're all


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           313

 1  assigned the same emissions level, which is the

 2  certification level.

 3           And next slide, please.

 4                            --o0o--

 5           CHIEF COUNSEL JENNINGS:  Because of that, we have

 6  concluded that although the ZEV credit information does

 7  qualify as trade secret under 6254.7D, it is not covered

 8  by the whole section because that provision doesn't cover

 9  this kind of information.  And that is not however the end

10  of the story.

11           Next slide.

12                            --o0o--

13           CHIEF COUNSEL JENNINGS:  But we are halfway

14  there.  Only half of the story is left.

15           There's another provision in the Public Records

16  Act 6254k, that says that anything that's privileged under

17  the Evidence Code is exempt from disclosure under the

18  Public Records Act.  And there is a provision of the

19  Evidence Code that exempts certain trade secret

20  information.  And it basically exempts the trade secrets

21  if the allowance of the privilege will not tend to conceal

22  a fraud of otherwise work injustice.

23           Next slide.

24                            --o0o--

25           CHIEF COUNSEL JENNINGS:  It's pretty obvious to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           314

 1  us that there's a special definition under the Evidence

 2  Code about what trade secret means.  But if it's trade

 3  secret under the other provision, we think it's trade

 4  secret under this one.

 5           So we get to the second clause there, and the

 6  question becomes would disclosure conceal fraud or

 7  otherwise work injustice?  There's one California case --

 8  reported case that interprets this in the context of the

 9  Public Records Act.

10           Could we go back one?

11                            --o0o--

12           CHIEF COUNSEL JENNINGS:  And that case is Uribe

13  versus Howie.  It was a 1971 case in which the farm worker

14  sought to gets the records that had been filed by

15  pesticide applicators of the monthly pesticide spray

16  reports they submitted to the County Ag Commissioner.  In

17  construing what conceal a fraud or otherwise work

18  injustice meant, that court basically applied a balancing

19  test.  They said that the trade secret might be protected

20  only if interests of justice are best served.  And after

21  couple pages of analysis and balancing the interest, that

22  court declared that the data was not exempt from

23  disclosure, because the interest in disclosure outweighed

24  the interest in nondisclosure.  And there's an analysis in

25  the report we did that goes into this in more detail.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           315

 1           Next slide, please.

 2                            --o0o--

 3           CHIEF COUNSEL JENNINGS:  So I think the most

 4  important thing here and the thing we need to do is

 5  compare the public interests.  And I'll jump ahead for a

 6  second.

 7           Just leave the slide as it is.

 8           We feel that there are powerful interests both in

 9  favor of disclosure and in favor of nondisclosure.  And

10  that because those present to a large extent policy

11  considerations and because the Board is the ultimate

12  policy maker for our agency that we're going suggest that

13  the Board is best suited in deciding how those different

14  public interests should be balanced.

15           So I'm going to go over now the public interest

16  in disclosure and then the public interest in

17  nondisclosure.

18           First the public interest in disclosure.  The ZEV

19  Alliance generally identified two reasons why they thought

20  that the data should be released.  And the first is they

21  believe there's a need of the public to monitor compliance

22  and to make sure that the regulation is being adequately

23  enforced.

24           I just learned today I think that issue may have

25  not just disclosure whether people are in compliance or


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           316

 1  not, but perhaps elements of how certain credits were

 2  assigned to vehicles back when and whether those vehicles

 3  should have qualified for those credits.  But they make

 4  this argument that the public needs to see the credit data

 5  to see if the regulations' being adequately enforced.

 6           When I thought about this, it struck me that the

 7  same considerations come up with income tax returns.  We

 8  don't really know that the Internal Revenue Service is

 9  adequately enforcing the tax laws with respect to a

10  particular person unless you see those tax returns and see

11  if they're doing it right.  And obviously there's a strong

12  interest in not releasing individual tax returns and that

13  doesn't happen in our country.  So there are

14  countervailing interests there.

15           We think that it is important to publicly release

16  the information that all manufacturers have positive

17  credit balances for model years 2005 and 2006.  And we

18  could provide more information to report something like

19  that.  But you'll have to evaluate how important this

20  consideration is.

21                            --o0o--

22           CHIEF COUNSEL JENNINGS:  The next slide talks

23  about the other public interest in disclosure.  And that

24  is -- and I think it's the more important one.  As we come

25  to the Board's consideration of the upcoming ZEV


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           317

 1  rulemaking, there is a concern among members of the ZEV

 2  Alliance that they won't really know what the impact of

 3  various amendments are unless they know what the ZEV

 4  credit status of the various companies are.  Because they

 5  don't know whether a company will have enough banked

 6  credits that they'll be able to move to a different

 7  compliance path, et cetera.

 8           And to give one example -- there aren't all that

 9  many examples, but there are certainly some good examples.

10  That the amount of an outstanding gold credit balance that

11  a company has may determine whether that manufacturer

12  would leave the alternative path and move to the base path

13  if the alternative path provisions were tightened so much

14  that they really didn't want to deal with those provisions

15  anymore.

16           When you move to the base path, you have to meet

17  all your gold obligation with gold vehicles.  So your

18  ability to move to that path depends on how many credits

19  you've banked for those pure ZEVs that you've produced in

20  the past.

21           I do want to mention one thing.  And I think this

22  is important.  That under the open meeting law, we believe

23  that the Board could conduct a closed session during the

24  rulemaking and the Board could receive all of the ZEV

25  credit data and review the material and discuss it -- the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           318

 1  Board members could discuss that data among themselves

 2  consistent with nondisclosure under the Public Records

 3  Act.  I think that would inform your decisions.  But the

 4  big issue is would that be satisfactory to members of the

 5  public, because members of the public are concerned with

 6  what will be the real impacts.

 7           CHAIRPERSON NICHOLS:  I just want to ask a

 8  question, which I think I know the answer to.  But just to

 9  be clear.  If this information were trade secret -- and if

10  it is trade secret and it were subject to complete

11  nondisclosure, even members of this Board would not have

12  access to it.  Only those individuals designated by the

13  requirements of the ARB would have it?  In other words, if

14  we hadn't made your balancing suggestion, if you hadn't

15  come to the balancing conclusion --

16           CHIEF COUNSEL JENNINGS:  Technically, the Board

17  members could see it at as parts of ARB without

18  disclosure.

19           But the key issue is to the extent it's relevant

20  to the rulemaking normally if you were going to discuss it

21  with other members, you would have to do that in the open

22  session.  And there is actually a provision in the open

23  meeting law that allows the Air Resources Board

24  specifically to have a closed session to consider

25  production data from manufacturers.  And we think that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           319

 1  this is close enough to be production data.

 2           Now you would still be under an obligation not to

 3  disclose it, because you could be State officers who've

 4  received this information.  But it would be satisfactory

 5  for your needs, but obviously there's a major question

 6  whether the public would find that adequate.

 7           So now to move to the next slide and talk about

 8  the last question --

 9                            --o0o--

10           CHIEF COUNSEL JENNINGS:  -- which is the public

11  interests in nondisclosure.  There are two public

12  interests we've identified.  The first one is the basic

13  interest that the companies have in not having their

14  information provided to potential competitors.

15           As I described before, it could tip off

16  competitors to their compliance plans.  It would affect

17  their bargaining positions and credit transactions.

18           There is a question that we haven't explored very

19  much, but it is possible that if everybody's data was

20  disclosed, that could in some ways level the playing

21  field.  Because although companies would know your data,

22  you could know their data.  But obviously some companies

23  who were sort of more on the edge would be more affected

24  than other companies.

25           Next slide, please.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           320

 1                            --o0o--

 2           CHIEF COUNSEL JENNINGS:  Which moves us to the

 3  last public interest that we've identified for

 4  nondisclosure.  And I think it's a very important one.

 5  And that is that the staff very much relies on

 6  confidential data that the manufacturers provide us in

 7  both developing regulations and implementing regulations.

 8  And there's a good deal of exchange there, and receiving

 9  that information is very important.

10           And there are even situations where we receive

11  confidential information that goes to the same kind of

12  issue that the ZEV credit data go to, because it goes to

13  whether companies can comply with the regulation or not.

14  There have been instances where individual manufacturers

15  have told us that they can comply with the proposed

16  regulation, even though the trade association is raising

17  lots of questions.  But they say, you can't tell.  You

18  can't publicly disclose that.

19           Question whether a member of the public would say

20  you need to disclose that information because that's

21  relevant to my ability to comment on whether the

22  regulation is technologically feasible or not.  I don't

23  want to minimize the importance of the trade secret

24  information that staff does receive on an ongoing basis

25  from the manufacturers and the potential impacts that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           321

 1  disclosure in this case could have on the ongoing supply

 2  of that data.

 3           CHAIRPERSON NICHOLS:  Tom, I'm sure everybody has

 4  comments and want to jump into this, but I just have to

 5  ask you one question about that, because this isn't --

 6  well, maybe I'm not understanding how the ZEV program

 7  works.  So maybe that's what I need more clarification on.

 8  Because it would seem to me that the information about how

 9  many banked credit a manufacturer has would be information

10  that we would have.  In other words, they may be

11  collecting it themselves, but they have to file that

12  information with us.

13           CHIEF COUNSEL JENNINGS:  That's correct.

14           CHAIRPERSON NICHOLS:  In terms of their sales

15  data.

16           CHIEF COUNSEL JENNINGS:  The information that we

17  have is all either directly submitted by the manufacturers

18  to us under these forms that they're required to submit or

19  is information that we've derived from the manufacturers'

20  submittals.

21           If we had information that wasn't -- that we had

22  identified independently, then there's no doubt that that

23  can be released, because we didn't receive it under a

24  claim of confidentiality.  And we have thought in ZEV

25  rulemaking about whether we could try to create data


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           322

 1  ourselves to provide information to you.  And it seemed

 2  like it was going to be a real challenge to do that.  So

 3  we haven't done that yet.

 4           CHAIRPERSON NICHOLS:  But I guess where I was

 5  headed with the question is that I understand the nature

 6  of the kinds of conversations that staff are able to have

 7  with representatives of manufacturers that enable them to

 8  make better judgments about where to go on rule makings.

 9  But those could be sort of informal conversations.  They

10  would be data collected.

11           CHIEF COUNSEL JENNINGS:  I was talking to Tom

12  Cackette and Bob Cross about that.  And I point out the

13  Public Records Act only applies to records, documents,

14  things like that.  If we're told something and there's no

15  writing involved, then it's not subject to the Public

16  Records Act.

17           Bob Cross pointed out that -- he's the guy who

18  runs these meetings with manufacturers about their product

19  plans, et cetera.  That there's a lot of technical

20  diagrams and things like that that are provided.  And it's

21  hard to just all keep it in our head without having any

22  records.

23           CHAIRPERSON NICHOLS:  Okay.

24           CHIEF COUNSEL JENNINGS:  So we're just about at

25  the end, and I'll go -- I think there are only two more


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           323

 1  slides.  We'll go to the next slide.

 2                            --o0o--

 3           CHIEF COUNSEL JENNINGS:  Which just talks about

 4  why we think it's appropriate for the Board to engage in

 5  this balancing test.

 6           And then the last slide is the summary.

 7                            --o0o--

 8           CHIEF COUNSEL JENNINGS:  We do believe that the

 9  ZEV credit information is trade secret.  But we don't

10  believe it's absolutely exempt from disclosure.  I do want

11  to emphasize that we have never looked at the precise

12  issue before about whether it has to fall within the

13  Subsection A, B, and C.  And we released our analysis only

14  on Monday, so I think you're going to hear from some

15  people that they haven't had enough time to analyze our

16  opinion.

17           And under the Evidence Code, you disclose whether

18  the withholding -- unless withholding the information

19  would not work an injustice, there's strong public

20  interest both ways.  And I think it's worth discussing

21  these issues now.

22           CHAIRPERSON NICHOLS:  And just to clarify the

23  process, if the Board were to decide that the interest in

24  disclosure outweighed the interest in nondisclosure, what

25  would happen?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           324

 1           CHIEF COUNSEL JENNINGS:  What would happen is the

 2  staff would send a letter to each of the manufacturers who

 3  submitted the data saying that we have decided that the

 4  data is not exempt from disclosure under the Public

 5  Records Act and that we plan to release the data after

 6  they receive 21 days' notice.  So we would identify the

 7  date the 22nd day -- it would be receipt, not delivery.

 8  So we have to figure that out.  But there would have to be

 9  a pause of at least three weeks before we release that

10  data.  And I think there's not an insignificant chance

11  they would go to court and try to get a restraining order

12  again us.

13           CHAIRPERSON NICHOLS:  They have time to do that

14  before the data goes out.

15           Okay.  Well, would anyone like to start the

16  discussion?  Yes.  I'm sorry.  We do have witnesses.  We

17  have to hear from them first.  Fair enough.  I forgot.

18           Don Anair from Union of Concerned Scientists,

19  followed by Sarah Flanagan with AIAM, I assume, and Linda

20  Nicholes.

21           MR. ANAIR:  Good evening.  I think I've gone

22  through all good morning, good afternoon, good evening.

23  But now I get to speak on behalf of my colleague, Mr.

24  Kwong, who couldn't be here and who is tracking this

25  issue.  So I just wanted to read his comments to you.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           325

 1           The Union of Concerned Scientists cannot speak to

 2  the legal aspects of the request to disclose zero emission

 3  vehicle credit data.  However, from a scientific

 4  standpoint, without the gold level credit data, it is

 5  impossible to analyze the effectiveness of the ZEV

 6  program.

 7           For example, much discussion on the ZEV mandate

 8  has centered on the 25,000 pure ZEV vehicle credits

 9  during -- requirements during 2012 through 2014.  If the

10  number of credits that each car company has accumulated is

11  unknown, it is impossible to tell if the gold requirements

12  in Phase 3 should be reduced or if an auto company can

13  meet its requirement using the banked credits, thereby not

14  producing any ZEV vehicles for three years.  How can the

15  public provide accurate comments on the proposed changes

16  to the ZEV program without knowing this information?

17           In contrast to the gold level vehicles, the

18  number of silver and bronze vehicles sold at dealerships

19  in California is publicly available for purchase from at

20  least two different companies.  That is, I can pay a

21  company to tell me how many ATP ZEV Priuses or PZEV Ford

22  Focuses or Foci, whatever you prefer, were sold in

23  California in 2006.  Because the data is available to the

24  public for a price, UCS wonders how much of a trade

25  secrets are these silver and bronze credits.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           326

 1           UCS strongly encourages the Board to release all

 2  record requested by the ZEV Alliance.  This will allow the

 3  public the opportunity to properly judge the effectiveness

 4  of the ZEV program.  Furthermore, if data on the ZEV

 5  program remains hidden it prevents proper scientific

 6  analysis of other ARB programs, such as the Global Warming

 7  Solutions Act.  Thank you.

 8           CHAIRPERSON NICHOLS:  Thank you.

 9           Sarah Flanagan.

10           MS. FLANAGAN:  Good evening, Chair Nichols and

11  members of the Board and staff.  I'm Sarah Flanagan,

12  Pillsbury Winthrop Shaw Pittman.  I make this statement on

13  behalf of six of the manufacturers:  General Motors, Ford,

14  Chrysler, Toyota, Nissan, and Honda.  I have two issues:

15  Process and merits.

16           The process issue is this is a very, very

17  significant decision you're being asked to make.  It has

18  ramifications beyond these records and beyond this agency

19  in terms of the interpretation of the absolute protection.

20           This is a radical departure from prior practice.

21  And Chief Counsel Jennings said that the Board hasn't

22  considered this issue before.  It has not been something

23  that has been the Board's position in the past.

24           We only learned about this new interpretation

25  late on Tuesday.  We scrambled to get a brief statement in


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           327

 1  front of you, but it is not the analysis that we want to

 2  be able to do.  So we asked that this decision be put off,

 3  that we be -- this is not a punt.  We need time to provide

 4  a good, thorough analysis.  Because it's not just the Air

 5  Board.  There are other agencies that use this section.

 6  So that's kind of number one.

 7           Number two on the merits.  Even though I know

 8  it's a special occasion and it's his retirement and all

 9  and there was that beautiful resolution read, I think he's

10  got it wrong on this one.  The absolute protection should

11  apply.  You can't just read out an amendment because it

12  doesn't fit within the interpretation you want to put on

13  it.  And not only have we relied on it and other agencies

14  relied on it, but the Board itself has relied on it.  So

15  you shouldn't change the interpretation overnight without

16  giving people a chance to really analyze and address it.

17           But on the merits, if you did get to the

18  balancing test, which I don't think you should because I

19  think the absolute protection applies.  If you get to the

20  balancing test, what could be more unjust than for a

21  government agency to tell the manufacturers that they will

22  be submitting the data with the absolute protection --

23  absolute protection for trade secrets.  And then after we

24  give you to data then you say, you know, we haven't looked

25  at this before, but now that we have, we don't think the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           328

 1  absolute protections should apply.  What can be more

 2  injustice than that?

 3           Because our clients would have given you only the

 4  minimum required had they known that.  They would not have

 5  provided the additional data that the staff finds helpful.

 6  I mean, that is unjust.  It's almost a rulemaking that

 7  we're having here where you're changing the rules of the

 8  game.

 9           I attached to my letter, which is under Mr. Bars'

10  name, the advisory that went out to the manufacturers with

11  respect to this very data.  And the section that talks

12  about confidentiality only talks about the absolute

13  protection.  If it's trade secret, it falls under the

14  absolute protection.  There's none of this A, B, and C

15  stuff.  And as -- well, we need more time.  Okay.  I'm not

16  going to get it now, but we need more time.  This is a

17  very significant matter.

18           CHAIRPERSON NICHOLS:  Thank you.  And I know

19  we'll be here so we can call you back for questions.

20  Appreciate that.  Would you point us to the page in the

21  letter or our document rather that deals with

22  confidentiality?  I'm not finding it.

23           MS. FLANAGAN:  Sure.  It's on page 6 of your --

24  the first attachment to our letter.

25           CHAIRPERSON NICHOLS:  Okay.  Thank you very much.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           329

 1           Ms. Nicholes, followed by Danielle Fugere and

 2  Bonnie Holmes-Gen.

 3           MS. NICHOLES:  Good evening, Chair Nichols and

 4  Board.  I'm Linda Nichols from Plug In America.

 5           Plug In America believes that the zero emission

 6  vehicle credit system should be fully transparent to all.

 7  Auto makers should not be allowed to continue to hide

 8  their current credit status of compliance from the public.

 9           ZEV credit data should be disclosed.  In the

10  past, the auto makers have used the ZEV credit block wall

11  to hide this important information from the public.  I'm a

12  member of the public.  This information is important to

13  me.  Disclosure allows the public to understand whether

14  plug-in cars are actually going to be put on the road and

15  what our expectations in the future might be.

16           ZEV credit disclosure is in the public's best

17  interest and does not hurt the auto maker's interest.  It

18  is truly up to the Board to decide.  Please do what is in

19  the public's interest.  Zero emission vehicle credit

20  disclosure should be treated as a public record and

21  certainly not a confidential trade secret.  The era of

22  hiding the current auto maker status of credit compliance

23  should be relegated to history.  Thank you.

24           CHAIRPERSON NICHOLS:  Thank you.

25           Danielle Fugere, Bonnie Holmes-Gen, and then


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           330

 1  Daniel Emmett.

 2           MS. FUGERE:  Good evening, Madam Chair and

 3  members of the Board.  My name is Danielle Fugere, and I

 4  represent the Blue Water Network, Friends of the Earth,

 5  which is a ZEV Alliance member.

 6           It's been over a year since we submitted our

 7  Public Report Act request.  So I appreciate your hearing

 8  this today.  And I hope that you make a decision on this

 9  issue today.

10           With your decision, you can either bring the

11  light of day to the ZEV credit system or can you put it

12  into a black box, hidden from the public, without access

13  or review.  If you find that the credits are secret and

14  the public must simply trust auto makers and regulators,

15  public confidence in the system will be gone.

16           Equally important, your decision today will set a

17  precedent for any market-based trading system set up under

18  AB 32.  The public trust in that system could be

19  undermined before it is even set up if all trading and

20  credit information is retained as secret from the public.

21           Contrary to staff's conclusions and auto makers'

22  assertions, the information we requested is not trade

23  secret.  In questions one and six, we requested a record

24  of the cars sold into the market by each auto maker.

25           Once a car is sold, that information becomes


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           331

 1  publicly available.  It's not easy available, but it's

 2  publicly available.  DMV records are available and

 3  companies like JD Powers sell the information.  They sell

 4  it for money, though.

 5           And because this information becomes publicly

 6  available, it can no longer form the basis of a trade

 7  secret claim.  It's no longer secret.

 8           The second type of information we requested.  We

 9  asked for information about ZEV credit allocations.  ZEV

10  credits are enforcement records.  CARB reviews auto

11  makers' sales data and makes a decision about compliance

12  status by issuing credit.  Those records of government

13  decision making are not trade secret.  Only the

14  information from the auto makers on which the government

15  relied for its decision can be the basis of a trade

16  secret, and that information is publicly available.  The

17  decision makers' issuance of credit is not an auto maker

18  secret.

19           And note that we have not asked for plans or

20  schematics or strategies.  We have not asked for any truly

21  trade secret information.  So we ask that you rule on this

22  issue of trade secret when you make your ruling.

23           The fundamental point of trade secret if a

24  company invests its time and resources into developing a

25  product, a formula, or some type of computation of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           332

 1  information for use in its business -- and that was left

 2  out of the criteria -- that product or information should

 3  not be freely given to competitors.  When they create

 4  something for their business, yes, the law gives it

 5  protection when it's provided to the government in the

 6  absence of some overriding public purpose.  But it's

 7  important to note it's the information that is protected,

 8  not the resulting government decision or accounting.

 9           In our case, auto makers are required to reveal

10  automotive sales data to CARB.  It is the sales data that

11  CARB would be required to maintain in confidence if that

12  information were not publicly available.  So we think

13  staff's analysis confuses those two issues and comes up

14  with the wrong decision.

15           I would like to go on.  This is an important and

16  complicated issue, but --

17           CHAIRPERSON NICHOLS:  It is an important and

18  complicated issue which we are dealing with.  What are

19  your additional points, just legal points or --

20           MS. FUGERE:  They're -- the point that -- the

21  information is not -- turning over ZEV credit is not

22  equivalent to providing competitors with knowledge of

23  upcoming product plans.  Nissan itself said that hundreds

24  if not thousands of factors goes into product planning.

25  It's not just ZEV.  It's CAFE, air quality.  It's customer


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           333

 1  information.  It's engineering information.  It's not just

 2  ZEV credit.  You don't know what another company is going

 3  to do just because you know the ZEV credits.

 4           Another argument that's frequently made is ZEV

 5  credits have value and that the auto makers should be able

 6  to trade in secret.  But this flies in the face of the

 7  purported benefit of a market-based trading system in

 8  which a free and open market allocates resources

 9  efficiently.  When you hide information, it's not

10  efficient any more.

11           CHAIRPERSON NICHOLS:  Okay.  I think if you want

12  to submit -- if you have a written testimony, that would

13  be fine.  We may talk further.  But I think the point that

14  several people have raised now confuse a number of

15  different issues.

16           I'm just -- I want to say for the record right

17  here that there's nothing about what we are doing here

18  that is relevant to whether or not there can be or should

19  be a cap and trade system put into effect or allocations

20  are assigned to people.  It's a totally different kind of

21  process than what we're talking about under the ZEV

22  program.

23           Just let me finish okay.

24           Because what we're talking about is compliance

25  data which is under AB 32.  It's treated in a completely


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           334

 1  separate way as an alternative compliance mechanism.

 2  That's the kind of mechanism we're talking about here if

 3  we were to go down the path of continuing to treat it as

 4  confidential data.

 5           The entire trading idea is very different and so

 6  is the way in which these credits are given.  So I'm just

 7  not buying your argument.  That's all I'm telling you.

 8           MS. FUGERE:  And I would just say that the

 9  industry will use this as a precedent, and they will say,

10  well, if the trading information in ZEV was secret, our

11  trading information should be secret as well.

12           CHAIRPERSON NICHOLS:  Well, they can try.  Okay.

13  I understand.

14           Ms. Holmes-Gen, Daniel Emmett, Tim Carmichael.

15           MS. HOLMES-GEN:  Chairwoman Nichols and members,

16  Bonnie Holmes-Gen of the American Lung Association of

17  California.

18           First, I'd like to thank you for calendaring this

19  item for public discussion.  I really greatly appreciate

20  that.  As you know, we submitted a joint request for this

21  disclosure of this information a year ago.  And we have

22  been anxiously waiting for a very long time for this

23  disclosure.

24           And we consider this request to really be a

25  fairly simple and modest request.  We don't believe that


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           335

 1  this information falls in the definition a trade secret.

 2  In concert with my colleagues, I really do not believe

 3  this information is actually secret.  I believe that it

 4  can be obtained if an individual or company has the

 5  financial resources and has the technical consultant and

 6  can do the number crutching to get this information.

 7           And so in this sense, this information is not

 8  known only to certain individuals within a commercial

 9  concern.  It can be obtained in the public arena, as has

10  been stated, for a price and with a lot of hassle that

11  most people in the general public certainly couldn't

12  afford or go through.  So in that sense, it's an injustice

13  that this information is available potentially to some who

14  could afford to obtain the information, but not to others

15  in the public who would not have the resources or the

16  ability to get that information.

17           Again, this is information that's based on the

18  certification standard of the vehicle and based on the

19  types of vehicles that were produced.  This is not

20  information that was created by a car company.  The

21  companies didn't create these credits.  They were given to

22  them.  It was a gift from a public entity in a sense.  And

23  we believe that information should be available to the

24  public for all the reasons that have been discussed.  So

25  that we can hold the car companies accountable for their


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           336

 1  obligations under the ZEV program.

 2           And as has been stated, it is extremely difficult

 3  to assess the car makers' progress, not only to assess

 4  their progress in meeting their obligations under the ZEV

 5  regulation, but to provide thoughtful and specific input

 6  on the potential changes that have been put before us

 7  without an understanding of how these ZEV credits are

 8  going to impact the obligations of the car companies and

 9  their potential plans and investments under the ZEV

10  program.

11           We need you today to determine that this

12  information is not a trade secret, and we need you to

13  grant our simple modest request and to make this

14  information -- give this information to the public.  There

15  have been some estimates that have been made of the credit

16  amounts that may have been accumulated by the car

17  companies.  And these estimates show that the car

18  companies collectively have over 100,000 gold credits.

19  For example, if that's the correct estimate, I don't know

20  for sure.  We don't have the information.  But this would

21  be an aggregate more than enough to fulfill the

22  obligations of the car companies under the ZEV program for

23  the Phase 2 time frame 2009 to 2011.  So clearly we have

24  significant concerns.  Clearly, we can't make a thoughtful

25  analysis of any changes to the ZEV program without this


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           337

 1  information.

 2           CHAIRPERSON NICHOLS:  Thank you.  Appreciate your

 3  comments.

 4           Daniel Emmett and Tim Carmichael.  That concludes

 5  our public testimony.

 6           MR. EMMETT:  Good evening, Chair Nichols and

 7  members of the Board.  Thanks for the opportunity to speak

 8  to you this evening.  My name is Daniel Emmett.  I'm

 9  Executive Director of Energy Independence Now and a member

10  of the ZEV Alliance.

11           I'm just going to very briefly echo many of the

12  comments that have been made today by my colleagues in the

13  ZEV Alliance that we really do need this information in

14  order to participate in the process and comment on staff's

15  recommendations to changes to the ZEV regulation.

16           I think all of our organization work to be

17  thoughtful and think about the programs and the details.

18  We want to be able to do that.  And we feel like we don't

19  have the information that we need to be able to do that.

20  And we feel in particular that this is not trade secret,

21  nor should it be considered as such.

22           With regard to the rational for compilation of

23  information, this is not a compilation of information

24  owned by the OEMs.  Rather, it's owed to ARB and the

25  public.  These compilations are information that are


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           338

 1  compiled about credits which are construct of the State

 2  and a construct of the ZEV program.  So we don't feel like

 3  this is trade secret.  And others have indicated that as

 4  well.

 5           We just want to close by saying we really need

 6  this information.  Thank you.

 7           CHAIRPERSON NICHOLS:  Thank you.

 8           Tim Carmichael.

 9           MR. CARMICHAEL:  Good evening.  I think my father

10  would say after Tom Jennings' presentation, thank you for

11  all the hard work.  It's clear as mud.  No offense

12  intended.

13           But there's a lot here.  And as every slide

14  showed, there's two sides to this issue.  Our basic

15  premise is the public has a right to know how -- has a

16  right to know if and how companies are complying with the

17  pollution laws of this state.  And that is a fundamental

18  right for this agency and for the public, because we're

19  talking about companies that are polluting.  We're talking

20  about sources that are polluting.

21           And Chairman Nichols, you know, I respectfully

22  disagree with your premise that this is so different than

23  AB 32 or what's going to come in that program.  I actually

24  think there's more similarity than difference in the

25  handling of credits and various polluters' intention to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           339

 1  maintain -- to keep information secret that should be

 2  public to ensure so that we can all ensure that pollution

 3  reductions are being achieved so that we can evaluate the

 4  effectiveness of this or future programs.

 5           I want to also say that I'm not sure that the tax

 6  reporting analogy really works.  We're talking about

 7  public corporations that, in fact, have to release all

 8  sorts have financial data, including their tax returns on

 9  an annual if not quarterly basis.  And so I think how

10  individuals handle their finances is not the same as how a

11  corporation has to handle public information.

12           The point was made by the attorney from Pillsbury

13  that it would be unjust to disclose this information.  And

14  I might believe that, if I believed that there could be a

15  competitive disadvantage or harm to any one of these

16  companies by releasing this data.  But as my colleagues

17  have mentioned, that is a very hard sell.

18           We are talking about a small fraction of the two

19  million vehicles sold in the state every year.  We're

20  talking about public companies that, once they have made

21  the sales, that information is -- they have to make the

22  sales to generate the credits.  And once those sales have

23  been made, that is public information.

24           The last point I want to make is that this is the

25  Air Resources Board.  This is not the Ninth Circuit or the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           340

 1  local district court.  And that's a good thing.  I think

 2  part of the reason your counsel punted to you is because

 3  this is more a public policy decision I believe than it is

 4  a legal decision.  The law, as was pointed out, can be

 5  interpreted a couple of different ways.  But as a matter

 6  of public policy, the California Public Records Act is

 7  very strongly in favor of public disclosure.  And there

 8  are court cases that, you know, make that finding over and

 9  over.

10           So we urge you to decide on the side of the

11  public interest and disclose this information.  Thank you

12  very much.

13           CHAIRPERSON NICHOLS:  Thank you.  Your last point

14  I think is a good one.  And let me just clarify what I was

15  attempting to say before.  I'm sorry if it was too short

16  circuited.

17           I agree with you that what we're dealing with is

18  a decision.  And all I was trying to say about the issue

19  of comparing this to other kinds of market or credit or

20  trading programs is that, from my point of view, the issue

21  that we need to be dealing with here is not the legal

22  interpretation of the law.  I think our counsel has told

23  that we can way the interests here.

24           My concern is that this is a program which was

25  set up in a certain manner.  And we need to find out how


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           341

 1  the program was set up and what were the legitimate

 2  expectations of people who participated in it as part of

 3  making the decision.  To me, that's very different how I

 4  would set up this program today.  If you we were beginning

 5  fresh to start a ZEV program and I were asked to come up

 6  with some mechanism for enforcing the program and for

 7  allowing people to get credits for different categories

 8  and trade those categories, speaking for myself and I

 9  suspect for the rest of this Board, I would never allow

10  there to be confidential information in that kind of an

11  arena.

12           But what we've heard and now need to get more

13  information about is think from our staff is, you know,

14  what actually was communicated to the companies.  What is

15  the basis and fact or mortality, if you will, for them to

16  be able to claim trade secret.  Not the legal issue, but

17  the more practical and also philosophical question that we

18  do have to grapple with here.

19           MR. CARMICHAEL:  Just one quick point on that.

20  Even if the staff did tell every auto maker that the

21  information would be preserved as a trade secret, to make

22  a decision later as we're talking about today not to honor

23  that or not to keep it trade secret, I think it's very

24  important to consider would there be harm, would there be

25  a competitive disadvantage for anybody?  If that is not


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           342

 1  the case, I think it's less significant to change the

 2  policy over time.

 3           CHAIRPERSON NICHOLS:  It's different, but there

 4  is a higher burden.  That's all I'm trying to say.

 5           Having said that, now staff, I've read this

 6  document that we send out to the companies, and it's just

 7  a regurgitation of the law.  It doesn't actually say we've

 8  accepted anything as a trade secret that was filed, even

 9  if they filed saying it's a trade secret.  There needs to

10  be some further action taken when somebody requests the

11  information before it actually gets stamped that way.

12           So can you illuminate this a little bit more in

13  terms of what you think the expectations of the companies

14  and the staff have been in this regard?

15           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well, I

16  think that we have followed the procedure that was listed

17  there.  The manufacturers submitted the data.  They

18  claimed trade secrets on it.  And it was being treated

19  that way until someone said I want to see that

20  information.  And at that point, the information -- we

21  have to notify them that someone wants to see the

22  information.  And then they provide the much more

23  elaborated rational for why it is trade secret or not.

24  And our attorney has concluded that he believes it is

25  trade secret.  So from that, that's the normal process if


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           343

 1  I've got that right, Tom.

 2           CHAIRPERSON NICHOLS:  So the whole history of how

 3  we got here today is that for the first time last spring

 4  you got a request for the compilation of the credits and

 5  then ruled on it?

 6           SENIOR ATTORNEY JOHNSTON:  It was submitted last

 7  December and we received -- I'm Diane Johnston, and I was

 8  the attorney who was assigned to actually respond to the

 9  initial request from the ZEV Alliance.

10           And they made their request in December of 2006.

11  And the information we gathered -- and we followed the

12  procedure in ARB's regulations for determining whether

13  disclosure is appropriate or not.  And part of that is

14  sending the information that we've collected to the people

15  who submitted it, in this case the auto manufacturers, and

16  have them indicate whether they believe that the

17  information that they had previously submitted and

18  indicated was confidential is, in fact, confidential and

19  to provide us with a rational for its confidentiality.  So

20  all of that information came into the ARB back in January,

21  February, and March of this year.

22           And then subsequent to that, we made an initial

23  determination that the manufacturers had carried their

24  burden for, you know, having us treat it as confidential

25  trade information.  And we advised the ZEV Alliance, the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           344

 1  requesters, of that fact.

 2           And then they asked for a meeting with the legal

 3  office.  And we had a conference call.  And things kind of

 4  developed from there to the point where in May when the

 5  Board heard the ZEV technology review, the ZEV Alliance

 6  once again renewed their request for the information.  And

 7  in response to that, the Board directed the staff to try

 8  to make this process of looking at this information as

 9  transparent as possible.

10           So we once again renewed our request to both the

11  manufacturers and the ZEV Alliance to provide this

12  additional analysis.  And that was done.  And at the end

13  of August, we had received all the information from the

14  various parties.  And we began our analysis at that point

15  looking at the law and reviewing the issues.  So here we

16  are today.

17           CHAIRPERSON NICHOLS:  That's helpful in terms of

18  the history.  It also I think casts a somewhat different

19  light both on the claim by the attorney for the auto

20  companies that they haven't had time to think -- I guess

21  they haven't had time to think about your new legal view.

22           SENIOR ATTORNEY JOHNSTON:  Right.

23           CHAIRPERSON NICHOLS:  But in terms of the facts

24  for the justification for why they think this information

25  should be kept secret, they've been well aware of the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           345

 1  request and the information for quite some time.

 2           SENIOR ATTORNEY JOHNSTON:  But our analysis was

 3  just posted on Monday.

 4           CHAIRPERSON NICHOLS:  Thank you.  That's helpful.

 5  Now I've been doing --

 6           MS. FLANAGAN:  I know this is out of order.  I

 7  could have brought six of my colleagues so I could rack up

 8  20 minutes.  But I --

 9           CHAIRPERSON NICHOLS:  If you're going to speak --

10           MS. FLANAGAN:  May I address the one reference to

11  the letter?  Because I think you're missing my point.

12           CHAIRPERSON NICHOLS:  All right.  If I

13  misunderstood you, you can explain.

14           MS. FLANAGAN:  The significance of the advisory

15  that went to the manufacturers is that under

16  confidentiality, the section it references is 6254.7.

17  That is the absolute protection for trade secrets.  It's

18  not the balancing test.  That's a separate section, which

19  is not mentioned at all in the confidentiality discussion.

20  Only the absolute privilege.

21           What we're now hearing is that they're saying

22  none of the data being submitted in this program could

23  possibly qualify for the absolute privilege.  Okay.  So

24  then why did you rely on the absolute privilege when you

25  were discussing with us how our documents would be


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           346

 1  treated?  That's my point.

 2           CHAIRPERSON NICHOLS:  Okay.  Understood.  Thank

 3  you.

 4           Well, does anybody have a suggestion?

 5           BOARD MEMBER RIORDAN:  Madam Chair, I don't have

 6  a suggestion, but I have a question, which is I

 7  understand -- I see this as two particular issues.  One is

 8  what do we do with what we've done in the past, and what

 9  might we do going forward?  And I don't know to -- our

10  attorneys, is there a difference, or is it just my

11  unsophisticated mind working here?

12           CHAIRPERSON NICHOLS:  To put it a little

13  differently, the a Board could establish a policy for what

14  we wanted to go going forward that would be different from

15  what we decide to do about the specific request that's

16  before us right now.

17           CHIEF COUNSEL JENNINGS:  I think there's a

18  definite policy that the Board could adopt a regulation

19  that says these data are going to be public.  I'm not sure

20  whether there would be a concern with the fact that we

21  would be declaring the stuff they claim to be trade secret

22  public, but it would certainly change things going

23  forward.

24           CHAIRPERSON NICHOLS:  Well, the alternative is to

25  try to do what you've been trying to do for a year now


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           347

 1  which is work it out in a way that would give more

 2  information to the groups that want it and still not

 3  disrupt the relationships or the expectations that the

 4  auto companies have.  And that doesn't seem to be making

 5  anybody happy.  I'm not sure it could.

 6           I guess maybe there is something short of a

 7  company by company release of the documents that they file

 8  that could give them the same level of information they

 9  really we need to participate in the upcoming discussions

10  about the ZEV program.  Frankly, I don't know that they

11  really need to have the level of company by company data

12  that we used to make decisions about enforcement as part

13  of participating in a rulemaking.  But I understand

14  clearly why anyone would want it.  I mean, without a

15  doubt, it would be helpful to them.

16           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  If I

17  could add one thing.  The relevance of a lot of this

18  information, assuming that you trust the data that we have

19  is accurate.  Forget the validation part of it.  Is that

20  we're trying to make projections for the future for 2009

21  for 2012 as to what would happen.  Of course, the credit

22  is only part of the information.

23           A manufacture can choose to produce a bunch of

24  new cars and generate new credit and not use its banked

25  credits.  They could produce very few vehicles and use


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           348

 1  lots of banked credits.  And that's of course what people

 2  would like to know.

 3           But it is a projection.  And even as we present

 4  the information, we're not able to predict what

 5  manufacturers will do with these credits, nor can the --

 6           CHAIRPERSON NICHOLS:  Nor can anybody else.

 7           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  That's

 8  one aspect of it.

 9           What we have tried to do is to recap from before

10  is we've -- for example, in phase 2, we know a number of

11  companies have credits, what we've tried to do is say if

12  the requirement is 2500 vehicles, which is what the

13  current requirement for '09 through '11 is cumulative,

14  then we don't -- based on what we know about the bank

15  situation and assuming that people don't produce more than

16  they have to, then we might get -- I don't remember the

17  exact numbers -- only 1200 vehicles.  The rest would be

18  made up by banked credits because people go on the base

19  path.  So we've been able to do that.

20           I don't think we have yet, but we can probably do

21  things like say and we think that at least two unnamed

22  manufacturers will be on the base path.  And we think

23  three will not.  And it tells you that the three that are

24  not have to produce new product of a certain amount.  And

25  on the other ones, they can use banked credits.  So it's


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           349

 1  some sense.  But if you go too much further than that,

 2  then it becomes -- I think there's probably an argument

 3  people can figure it out, because we're only talking about

 4  six manufacturers.  You can get to some point where we're

 5  essentially releasing it.  Where that line is, I don't

 6  know.  And I don't know if that little bit more of

 7  information that we can perhaps provide would be useful to

 8  the Alliance or not.

 9           CHAIRPERSON NICHOLS:  What I'm finding

10  interesting about this whole discussion is what's really

11  of value is the kind of judgment based on a more intimate

12  knowledge of what the plans of the companies are that ARB

13  staff has, which is based on both conversations and

14  probably on some documents that you obtained in the course

15  of your meetings with the companies that you do on a whole

16  bunch of different things, which is not the subject of

17  this disclosure request.

18           The only thing that is actually being requested

19  is what do they got in the bank at any given time.  And to

20  me, what makes it so difficult to take the position that's

21  a trade secret is it looks so much like any other kind of

22  routine data that we would request for reporting purposes

23  that we would use for enforcement.  And so the only threat

24  from having that data released from my perspective is that

25  people would misuse it or would treat it as being kind of


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           350

 1  the only issue in whether the ZEV program could go forward

 2  in a certain way or not as opposed to actually doing any

 3  real harm.

 4           You've had your hand up for a while there.

 5           BOARD MEMBER D'ADAMO:  Well, I would just like to

 6  maybe give a little bit of historical perspective on this.

 7  Because when I first came on the Board in 1999, this was

 8  the hot issue.  And I think we had a hearing in 2001 where

 9  we made some adjustments.  Then we had another hearing in

10  2003.  There may have been another review in between.

11           But in my opinion, what this gets down to is that

12  the credits are an issue because certain manufacturers may

13  be choosing to go from the base path to the alt path.

14  This is their choice.  This was a choice that we gave them

15  because of the concerns that they had relative to the 2001

16  regulation.

17           And I would like to say that every step of the

18  way we have been gamed.  And I think it's absolutely

19  crucial for us to get as much information as possible, not

20  just from the auto makers, but from the general public.

21  Because we may be missing what the impact is of the

22  regulation and the impact of the proposal that we're

23  looking at.

24           I suppose the alternative is to just say you

25  don't want -- the auto makers feel so strongly about


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           351

 1  disclosure that we should not disclose that to the public.

 2  In that event, let the old regulation stand.

 3           But they are asking once again for us to make a

 4  change.  And so I think that that very issue goes to our

 5  need to balance.  If it is in their interest that the

 6  regulation be changed, then I think that the only way that

 7  we can properly evaluate whether or not making changes is

 8  appropriate would be if we have a full and public

 9  discourse of that information.  And

10           I would agree with you.  I would like -- I

11  appreciate the legal analysis, but I just can't get past

12  my gut feeling that this is like a reporting requirement

13  and really nothing more than that.

14           CHAIRPERSON NICHOLS:  Supervisor Hill.

15           SUPERVISOR HILL:  Thank you, Madam Chair.

16           I really agree with you and you really focused in

17  on the issue.  The issue is the credit.  We're talking

18  about credits.  We're not talking about plans or the

19  confidential information they may bring to you on an

20  ongoing basis.

21           To me, they will continue to bring that

22  confidential information if it serves their interests.  If

23  it doesn't serve their interests, they won't bring it to

24  you.  And that's how I see this as going forward.  It's

25  clearly the public's interest -- in the public's interest.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           352

 1  And the disclosure is I think crucial as we move forward

 2  with the program so that everyone will be on the same

 3  page.

 4           And I think, Tom, you made it clear.  I think if

 5  there is full disclosure, then everyone -- it's a level

 6  playing field and it's not going to effect anyone

 7  adversely.  And I would support that and move for that

 8  today.

 9           DIVISION CHIEF CROSS:  We agree with you.  We're

10  trying to revise the program in ways where the credit

11  system becomes less important.  And so I think the staff

12  has been struggling with exactly the kinds of concerns

13  that both you and the ZEV Alliance have in terms of both

14  gaming and a lot other things, like some of the vehicles

15  which contribute to the credit system aren't sold.  I

16  mean, they're lent to people.  And there's all kinds of

17  stuff that the manufacturers do that even sort of through

18  disclosure without a lot of explanation isn't going to be

19  transparent.

20           So I think the thing that we need to do is to use

21  up the credits and move to a transparent system.  I think

22  the staff is trying to work on a proposal that will do it.

23  So what I'm saying is that the disclosure issue is a short

24  term issue if we get to where we want.

25           CHAIRPERSON NICHOLS:  One way or the other.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           353

 1  Okay.

 2           DIVISION CHIEF CROSS:  For this regulation.

 3           CHAIRPERSON NICHOLS:  Supervisor Case and then

 4  Supervisor Roberts.

 5           BOARD MEMBER CASE:  I'm going to weigh in in a

 6  similar way.  I don't have the history and I read through

 7  documents.  Today we're looking at a policy decision.  I

 8  have an anecdotal history that back in '99 I was trying to

 9  get a hold of one of these vehicles, something to drive.

10  And I couldn't find them.  I couldn't find information

11  them and couldn't get one.  It took me almost two years.

12           So, you know, I think there is a public interest

13  that we're trying to weight here.  And I live in the world

14  of HIPAA and health care.  And I understand

15  confidentiality.  And I also come from a business family

16  and I understand trade secrets.

17           But I think as we go forward in looking at this

18  rule, it has to be done on full disclosure.  And that

19  combined with some dissatisfaction -- I think I've heard

20  other people state on the program and I'm in that camp

21  that I don't feel that things happened as I would have

22  liked to have seen, a stronger direction.

23           I think I don't hear anything.  I keep thinking,

24  okay, what about a business.  Would this be so harmful to

25  their operation?  And I can't come up with that answer.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           354

 1           So I'm going to weigh in I think there's a

 2  good -- from a policy perspective, there's a good argument

 3  for full public disclosure.  So that as we move forward

 4  with a new rule, it really comes with a full public

 5  vetting and we all understand where we are and a sense

 6  that in the past this may have been something that didn't

 7  allow us to really get a grasp on why or why not we had

 8  great degrees of succeed there.

 9           I'm going to second the motion.

10           CHAIRPERSON NICHOLS:  Okay.  Supervisor Roberts.

11           BOARD MEMBER ROBERTS:  Thank you, Madam Chair.

12           SUPERVISOR HILL:  I did make a motion.  You're

13  right.

14           BOARD MEMBER ROBERTS:  Listening do this, it

15  seems to me that I found compelling the argument that the

16  data is available if somebody were to take the time to go

17  out there and do that.

18           The thing that concerns me is that this really is

19  a change in the expectation that somebody that in effect

20  entered into an agreement with us has been reliant on.

21           And while this has been going on for a year, if I

22  understand correctly, the attorney's position here is all

23  about three days' old.  I would feel very remiss to make a

24  decision of this kind giving somebody three days' notice

25  that, in effect, has been proceeding in good faith.  I


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           355

 1  don't feel like I'm a victim in this or that I've been

 2  manipulated if I had done it with my own eyes open and

 3  I'll take responsibility for that.

 4           And I find the arguments that we should do this

 5  compelling.  But the manner in which we're doing this and

 6  the length of time that we've permitted for somebody to --

 7  the other side to respond in a thoughtful way I think is

 8  inexcusable and I'm not going to support this motion.

 9  I've would recommend -- my recommendation would be to, you

10  know, allow -- I don't know why this has to be done

11  tonight.  I don't know what's driving this.  But to make a

12  decision of this sort, you know.  And I appreciate the

13  fact that Tom is retiring.

14           CHAIRPERSON NICHOLS:  You know, he's going to be

15  back.  As I said earlier, he's going to work for us on the

16  low carbon fuel standards.  So he's not really escaping.

17           BOARD MEMBER ROBERTS:  I would rather we take the

18  month or so to our next meeting and allow for arguments to

19  be prepared so we can --

20           CHAIRPERSON NICHOLS:  We have a motion and a

21  second on the floor, but I understand your point.  And I

22  actually I have a good bit of sympathy for, because I do

23  think that we're doing something that's important that is

24  going to have implications for the future, whether it has

25  them for the entire world of all trading programs, it


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           356

 1  certainly has them with respect to our dealings with the

 2  auto companies.

 3           BOARD MEMBER BERG:  I would like to move that

 4  table this discussion and move as Supervisor Roberts

 5  suggested that we give additional 30 days for the review

 6  of the staff's legal position and gives also this Board

 7  the opportunity to get the additional information.

 8           I think we're looking at two things, Madam Chair.

 9  That is the past and how we want to move forward.  Good

10  public policy moving forward, I don't think you'd have too

11  much of an argument around this table.  But doing the

12  right thing for both our credibility so when we take the

13  vote that we know that we have all the information.  So I

14  would vote to table.

15           CHAIRPERSON NICHOLS:  Is there a second?

16           BOARD MEMBER CASE:  I'll second.

17           CHAIRPERSON NICHOLS:  Before we act on that,

18  which takes precedence over the other motions, I would

19  like to get a little more information from the staff about

20  if process by which we get these reports from the

21  manufacturers.

22           This is an annual reporting requirement, is it

23  not?  And so when would we be normally getting the reports

24  that would give us the status of their credit situations?

25           MANAGER BEVAN:  If I recall correctly, we


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           357

 1  received -- this is Analisa Bevan, the Mobile Source

 2  Control Division.

 3           We receive the data in May following the model

 4  year.  And we take some time to verify that information

 5  with the manufacturer, and then we issue a statement --

 6  credit statement back to them indicating that their

 7  credits have been deposited.  They can report credit

 8  trades throughout the year, and those transactions take

 9  place with a confirmation as well.

10           CHAIRPERSON NICHOLS:  So this is making my life a

11  little more complicated.  You're actually issuing to them

12  a credit statement?

13           MANAGER BEVAN:  Correct.

14           CHAIRPERSON NICHOLS:  It's not a credit statement

15  they sent us.  This is a document we prepared.

16           MANAGER BEVAN:  They send us a deposit, the data

17  indicating the number of vehicles, which vehicles, and the

18  calculation of the credit.  We deposit that into the bank

19  and then feed back to them now what their total balance

20  is.

21           CHAIRPERSON NICHOLS:  It sounds like a public

22  record to me.

23           SUPERVISOR HILL:  If I could add one thing.  I'm

24  just going to say to the issue that this is -- people just

25  got this a couple of days ago and there hasn't been enough


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           358

 1  time to vet it and to discuss it.  This has been going on

 2  for years.  And the auto industry, as the manufacturers,

 3  have been able to certainly present their arguments

 4  throughout this whole process in the past year.  So I

 5  think there's nothing new here we're talking about tonight

 6  that the needs to be further analyzed or discussed.

 7  They've already made their point.

 8           CHAIRPERSON NICHOLS:  I'm going to let Tom

 9  Jennings address the earlier point and then Dan Sperling

10  has a --

11           CHIEF COUNSEL JENNINGS:  Although we do issue

12  credits, the credits are based entirely on the data that

13  the companies submit to us.

14           But also comment a little bit on Supervisor

15  Hill's statement.  Ordinarily, when we got a Public

16  Records Act request and make a determination, it's not

17  brought to the Board.  You've never had one of these come

18  to you before.  So ordinarily based on the information

19  that we receive, we would have just issued our decision

20  without any additional public comment.

21           What's particularly important in my view is that

22  this is the first time that you've really considered the

23  issues of the public interest both for and again

24  disclosure.  And to the extent the people want to give you

25  comment on that, they have only had the three days notice.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           359

 1           CHAIRPERSON NICHOLS:  Well, and I'm very

 2  appreciative of the fact when you took a look at this, you

 3  did determine there was a policy issue here.  Because if

 4  you had just gone on your previous decision that this was

 5  trade secret and no way to release it, we would have been

 6  in a position of being sued by the public interest groups,

 7  the ZEV Alliance and others that want the data.  And I

 8  prefer not to be in that position if I could avoid it.

 9           Dan Sperling had his hand up first and then --

10           BOARD MEMBER SPERLING:  So I just want to observe

11  two lessons learned here and then a suggestion.

12           I think the two lessons learned are let's not

13  make it so complicated in the future.  And as Bob Cross

14  and Analisa just said, that is the intent.  So hopefully

15  we'll learn the lesson not just for the ZEV program but

16  for a lot of other programs as well.

17           And that is the second lesson -- and so the

18  second lesson is also that we are more careful in how we

19  communicate to companies about data that they're providing

20  to us and be clear on what exactly is confidential and

21  what is not.  Because I'm not convinced here in this case

22  there's anything really confidential.  I mean, they're

23  just providing sales data.  And because of all of our

24  complicated rules that no one can figure out -- you know,

25  I'm probably the most involved in this on the Board here,


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           360

 1  and I can't figure out a lot of these things that are

 2  going on.  You know, you get into the travel provision and

 3  so on, you know, how to convert that into credit numbers,

 4  you know, becomes very difficult.

 5           So what I'd like to suggest is that I believe

 6  that the staff has not talked to the car companies about

 7  how to move forward on this issue, what might be a

 8  compromise in terms of what could be disclosed and suggest

 9  that that discussion take place with the intent that we do

10  want to become more transparent.  And maybe this is just

11  releasing the -- kind of where Tom Cackette was going a

12  little earlier releasing some kind of information about

13  how many -- what is the credit balance, you know, per

14  company and not get into exactly which models that came

15  from and how that's calculated and not make, of course,

16  any projections to the future.  And that seems to be

17  something that like that is may be -- something like that

18  can be done here without having to make any great

19  precedent setting decisions.

20           CHAIRPERSON NICHOLS:  How quickly are you

21  intending to come back with a proposal for changing the

22  bank or eliminating the bank or closing the bank or

23  whatever?

24           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  We're

25  scheduled right now to come to you with revisions to the


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           361

 1  ZEV program in the February Board meeting.  That means

 2  that Analisa has to have her work done in another week and

 3  a half in order to put it into the 45 day process.  So

 4  that was the schedule for doing that.

 5           One aspect of that proposal -- and of course the

 6  proposal was that the way by maintaining the second phase

 7  '09 through '11, the way it is now it would force the

 8  draw-down of the bank.  That's where the previous comments

 9  came.  Not many people would have any credits that are old

10  left by the end of the second phase.

11           And in the third phase, we were only going to

12  allow averaging and carry forward or carry back type

13  things over a two or three year period, which would keep

14  everything fresh.  It would mean what you see is what you

15  get when you pick a number for the various phases, so

16  forth, so on.

17           That was why the comment before this was it's not

18  to diminish from the policy issue or the legal issue, but

19  it is kind of a three-year thing and it goes away.

20           CHAIRPERSON NICHOLS:  A practical issue.

21           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  We

22  chose that because of what Professor Sperling says is this

23  thing is too messy and we wanted to get rid of this.  I

24  think the case that it needs to be more transparent has

25  been very clearly made.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           362

 1           It started -- bit of history was because of what

 2  was called the blackout, and there was a fear by many of

 3  the ZEV Alliance that because of credits, someone rich in

 4  credits, they could go three years and never produce a

 5  ZEV.  And therefore somehow that would stymie the

 6  development of these new technologies.  And I think we've

 7  believed that's possible with the current credit bank,

 8  which is why we want to draw it down and get it over with

 9  in '09 through '11.  But we also don't think that's going

10  to happen.

11           But it is clear to us different manufacturers are

12  in very different positions.  Some will not make the

13  numbers that our regulation would suggest to you they will

14  make by the credits.  And other ones will have to make

15  every last one of them or pretty close to that.  That's

16  the situation with the reg.

17           And since the purpose of this presumably you're

18  saying this is important that the public understand this,

19  if that's where you go, then, you know, I think one month

20  delay just means we have to delay the ZEV item by one

21  month.  Because otherwise we'd have the proposal in front

22  of you and the public would not know what it was based on.

23           CHAIRPERSON NICHOLS:  In a sense tabling this is

24  not a helpful way to go then in terms of helping you move

25  forward to actually change the situation.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           363

 1           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

 2  two things.  Yes, it delays it.  But there is not a hard

 3  deadline that I'm aware of.  No one is screaming that

 4  we're in trouble here and they have to make product

 5  decisions.  I guess that's not true.  There actually is at

 6  least one company that told us that in late January they

 7  have to make product decisions.  This is somebody who

 8  doesn't have a lot of credits on exactly what they're

 9  going to produce.  And they were looking to see our

10  proposal if not your final decision at that time.  So you

11  know, I guess for some companies it may causes problems

12  with them.  But not everyone is clamoring this has to get

13  done.

14           CHAIRPERSON NICHOLS:  Ms. D'Adamo.

15           BOARD MEMBER D'ADAMO:  That was my point.  I

16  think if we do end up with a delay, what I wouldn't want

17  to see is we are backed into a corner because of some

18  artificial deadline that is out there because of decisions

19  the auto makers need to make.  If it's that crucial they

20  need to make the decisions, you know, on their product

21  line, then perhaps what Professor Sperling indicated that

22  it would bring them to the table to try to come up with a

23  way to provide the information.

24           If not, what I don't want to see happen is that

25  we move forward at the next stage of beyond the concept


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           364

 1  paper and once a proposal is out on the street, it will be

 2  too difficult for us to provide much meaningful input,

 3  especially if we don't have information from the public

 4  about the impact of those credits.  If we delay, I think

 5  the whole thing needs to be delayed.

 6           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  In the

 7  case, the one manufacturer I'm aware that says they have a

 8  timing issue is one that doesn't care about the public

 9  disclosure.  They're fine disclosing it.  That won't

10  provide a leverage unfortunately.  And the other ones who

11  are more concerned don't seem to be as concerned about the

12  timing.

13           CHAIRPERSON NICHOLS:  So where we are right now

14  procedurally, we have a motion to table.  And the effect

15  of that would be that this item would simply be carried

16  over to the next Board meeting, as I understand it.  And

17  otherwise nothing would happen.

18           BOARD MEMBER CASE:  If I could just clarify

19  understanding that if given the first motion would have

20  moved forward to allow disclosure because of the public

21  interest that the companies, would be contacted and there

22  would be some dialogue prior to any disclosure.  So that

23  wouldn't happen just immediately?

24           CHAIRPERSON NICHOLS:  Well, it's 21 days from the

25  time they receive the notice.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           365

 1           CHIEF COUNSEL JENNINGS:  We would absolutely have

 2  to give them 21 days notice before we would released any

 3  data.  Whether you wanted to discussions to occur during

 4  that period of time, which throw might even end in some

 5  other kind of resolution, that would be up to you.  But we

 6  couldn't release the data for 21 days.

 7           BOARD MEMBER CASE:  And the other option is to

 8  table it for one month and have a discussion with them.

 9  Well, this is December.  So if it's tabled to January, it

10  would be our very next meeting.  If there were dialogue

11  during that period that the Board was giving consideration

12  for this, it might resolve some of those issues.  Because

13  as I understand, the revision to the policy will coming

14  back to us currently scheduled in February.  And that

15  could potentially give information to the public I would

16  hope by 30 days prior to the second hearing.  But does

17  that happen if we table it and hold off, then do we have

18  the 21 day noticing and we bump up again February

19  regulatory hearing?

20           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  If you

21  table it, what the sense I'm getting is you could like us

22  to go sit down with the two parties.  And given where at

23  least I'm hearing the Board is coming, I think they can

24  see when the leaning is at least.  So sitting down and

25  trying to figure out is there some compromise where, you


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           366

 1  know, the NGO side can get the information they want and

 2  the car companies can have some possible protection of

 3  really valuable information and see if we can find a

 4  compromise that the parties would like.

 5           That's a compromise approach.  You may be

 6  focusing on the simple policy issue which is a black and

 7  white issue here.

 8           CHAIRPERSON NICHOLS:  Well, I guess another

 9  alternative, while we're just tossing alternatives for

10  what could happen around, is the Board could tonight

11  decide we want to move in the direction of disclosure, but

12  we want to do it by regulation.  So that going forward we

13  declare that this stuff isn't trade secret and that it

14  never would be trade secret.

15           SUPERVISOR HILL:  How would that effect the

16  credits currently out there for the decision making that

17  we'll have the February where the public should have a

18  right to know that information?

19           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  If you

20  wanted the regulation to be retroactive to the credits, I

21  think there's probably a legal issue that needs to be

22  looked at, if I'm correct, Tom.

23           And then of course that would -- if it was a

24  regulation to do this, that would set I think the ZEV

25  program back six to nine months.  Because that's how long


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           367

 1  it would take to do any kind of regulation, regardless of

 2  how simple it was.

 3           CHAIRPERSON NICHOLS:  What I was really trying to

 4  accomplish with that suggestion was make it clear I really

 5  want these changes and the banking system to be part of

 6  whatever comes forward with your proposal.  I understand

 7  the regulation process could make much longer.

 8           Yes.

 9           BOARD MEMBER KENNARD:  Let me weight in quickly.

10  This is so complicated.  And I'm a lawyer, but I must be

11  totally recovered because I just can't even totally really

12  can't understand all of it and have not had the benefit of

13  reading the Pillsbury document, et cetera.

14           So I think that we're inviting litigation on

15  either side unless we go back and try to work it out.  So

16  I'm very much in support of giving us all a little bit of

17  breathing room to, one, understand what's really on the

18  table and, two, to maybe work out a compromise between the

19  two parties.

20           CHAIRPERSON NICHOLS:  Okay.  Ms. D'Adamo.

21           BOARD MEMBER D'ADAMO:  I just want to make sure I

22  understand schedule.  So if we give staff some additional

23  time, it comes back in January.  Then we assuming that a

24  compromise is not reached in January, we would have an

25  opportunity at that point to re-visit the issue as to


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           368

 1  whether or not we should disclose.  And if this Board did

 2  take a position at that time to disclose, there would be

 3  21-day period before the disclosure would occur.

 4           In light of that, what would be the time frame

 5  for release of the proposal?  And when would the hearing

 6  be?  Assuming that we would have an opportunity for

 7  adequate public discussion prior to the hearing?

 8           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Well,

 9  release of the proposal right now for February is 11th of

10  January.  So I guess if we delayed it one month, it would

11  be something like approximately 11th of February, which

12  would be after your discussion at the January Board

13  meeting.  So we would be able to possibly reflect any

14  direction we have in the regulations.  So it could be a

15  one month maybe a two month delay.  But this would be all

16  that would be required.

17           BOARD MEMBER D'ADAMO:  So March or April.

18           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Of

19  course, the flip of it is if you release it, I'm assuming

20  a vote for release and we go through the 21 and possible

21  litigation, I presume we're going to go ahead with

22  litigation at that point and not wait for litigation to be

23  resolved.

24           BOARD MEMBER D'ADAMO:  And --

25           CHAIRPERSON NICHOLS:  We wouldn't be releasing


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           369

 1  the data if the car companies prevailed.  They would --

 2  presumably they would get a temporary injunction, because

 3  otherwise the whole thing would be --

 4           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  If they

 5  got a -- well, still your point applies to the

 6  information.  You'd have to make the call as to whether

 7  our regulatory process should stop while this is resolved

 8  which, of course, could be years, I suppose.

 9           CHAIRPERSON NICHOLS:  I prefer not to do that.

10           CHIEF DEPUTY EXECUTIVE OFFICER CACKETTE:  Or we

11  go ahead with the reg changes based on the information --

12  you directing it to be released but not be able to be

13  released because of the legal thing, and we go ahead which

14  is kind of where we were going before this issue came up.

15           CHAIRPERSON NICHOLS:  We still have to do it

16  anyway.  Okay.  All right.

17           Then I think I will call the question on the

18  motion to table and let's do a roll call vote on this one

19  please.

20           BOARD MEMBER SPERLING:  Could you elaborate what

21  that means?  Say that again.

22           CHAIRPERSON NICHOLS:  The motions that is that we

23  table this discussion on the motion to release the data,

24  which was made earlier by Supervisor Hill and seconded by

25  Supervisor Case.


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           370

 1           The earlier motion to that we determine that it

 2  was in the public interest to release the data, that

 3  motion would come back before us at the January meeting.

 4  And we would not make a decision on it.  And that would be

 5  the end of the discussion for tonight.

 6           BOARD MEMBER SPERLING:  What are we assuming is

 7  going to happen in the next month?

 8           CHAIRPERSON NICHOLS:  The assumption underlying

 9  that is that staff would attempt to bring the parties

10  together and to see if there is a way to resolve this

11  issue short of litigation, which is otherwise inevitable

12  by one side or the other.  I think it's clear people have

13  worked themselves up to that point.

14           Okay.  So on the motion to table, Madam Clerk.

15           SECRETARY ANDREONI:  Ms. Berg?

16           BOARD MEMBER BERG:  Aye.

17           SECRETARY ANDREONI:  Supervisor Case?

18           BOARD MEMBER CASE:  Aye.

19           SECRETARY ANDREONI:  Ms. D'Adamo?

20           BOARD MEMBER D'ADAMO:  Aye.

21           SECRETARY ANDREONI:  Supervisor Hill?

22           SUPERVISOR HILL:  Aye.

23           SECRETARY ANDREONI:  Ms. Kennard?

24           BOARD MEMBER KENNARD:  Yes.

25           SECRETARY ANDREONI:  Ms. Riordan?


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           371

 1           BOARD MEMBER RIORDAN:  Aye.

 2           SECRETARY ANDREONI:  Supervisor Roberts?

 3           BOARD MEMBER ROBERTS:  Aye.

 4           SECRETARY ANDREONI:  Professor Sperling?

 5           BOARD MEMBER SPERLING:  Aye.

 6           SECRETARY ANDREONI:  And Chairman Nichols?

 7           CHAIRPERSON NICHOLS:  I think I'll vote aye.

 8           SECRETARY ANDREONI:  Motion passes.

 9           EXECUTIVE OFFICER GOLDSTENE:  We will work to

10  bring the parties together.

11           CHAIRPERSON NICHOLS:  Thank you very much

12           This has been a really good discussion.  And that

13  it for tonight, and we'll see you all tomorrow morning.

14           (Thereupon the California Air Resources Board

15           recessed at 6:49 p.m.)

16

17

18

19

20

21

22

23

24

25


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345


                                                           372

 1                    CERTIFICATE OF REPORTER

 2           I, TIFFANY C. KRAFT, a Certified Shorthand

 3  Reporter of the State of California, and Registered

 4  Professional Reporter, do hereby certify:

 5           That I am a disinterested person herein; that the

 6  foregoing hearing was reported in shorthand by me,

 7  Tiffany C. Kraft, a Certified Shorthand Reporter of the

 8  State of California, and thereafter transcribed into

 9  typewriting.

10           I further certify that I am not of counsel or

11  attorney for any of the parties to said hearing nor in any

12  way interested in the outcome of said hearing.

13           IN WITNESS WHEREOF, I have hereunto set my hand

14  this 17th day of December, 2007.

15

16

17

18

19

20

21

22

23                             TIFFANY C. KRAFT, CSR, RPR

24                             Certified Shorthand Reporter

25                             License No. 12277


   PETERS SHORTHAND REPORTING CORPORATION  (916) 362-2345
