August 11, 1995

South Coast Air Quality

Management District Board

During the public hearing on Regulation XX - RECLAIM, several representatives of stationary source facilities expressed interest in developing mobile source credit programs which will provide additional opportunities to comply with District regulations. In response, Proposed Rules 1612 and 1620 have been developed to provide greater opportunities to generate mobile source emission reduction credits (MSERC) that could be used as an alternative means of compliance with District regulations. The administrative procedures are similar between the two proposed rules. Proposed Rule 1612 applies to on-road motor vehicles and 1620 applies to off-road mobile equipment. The proposed rules would meet the 1994 Air Quality Management Plan commitment for control measures MON-05, MON-06, and MOF-04.

Under the provisions of Proposed Rules 1612 and 1620, on-road motor vehicle operators or off-road mobile equipment operators can choose the most cost-effective compliance alternatives to suit their needs. Voluntary implementation through the purchase of new low- or zero-emission vehicles or off-road equipment, or retrofitting or repowering of existing heavy-duty vehicles and off-road equipment, or permanent replacement of existing off-road mobile equipment with non-polluting alternatives, will result in MSERCs which can be used to comply with other District regulations or be traded to other facilities. The MSERC calculation is based on emission standards established by the California Air Resources Board (ARB) or the U.S. Environmental Protection Agency (EPA) or through alternative engine testing which follows ARB certification test procedures (subject to District and ARB approval). Operators will participate in these programs if these alternatives are less costly to implement than other District regulations. In addition, the proposed rules provide additional incentives to promote advanced technological vehicles and equipment by providing credits for these technologies. On balance, implementation of the proposed rules will result in increased flexibility and cost effectiveness.

Pursuant to the District's Certified Regulatory Program (Rule 110), the District has prepared appropriate California Environmental Quality Act documentation, consisting of a Draft Environmental Assessment (EA). The Draft EA has been circulated for a 30-day public review and comment period and is included as part of this package. A Final EA will be prepared which includes responses to all comments received on the Draft EA.

The attachments to this package contain an outline of the rule development process (Attachment A), Proposed Rules 1612 and 1620 along with a draft staff report for each rule (Attachments B and C), Draft EA (Attachment D), and the Draft Socioeconomic Analysis (Attachment E).

THEREFORE IT IS RECOMMENDED THAT YOUR BOARD

--Set a public hearing September 8, 1995 to adopt Rule 1612 - Credits for Clean On-Road Motor Vehicles and Rule 1620 - Credits for Clean Off-Road Mobile Equipment.

Respectfully,

James M. Lents, Ph.D.

Executive Officer

BRW:JPB:HH

Attachments

hh: rules-bd.doc

ATTACHMENT A

RULE DEVELOPMENT PROCESS

ATTACHMENT B

PROPOSED RULE 1612 -
CREDITS FOR CLEAN ON-ROAD VEHICLES

JULY 25, 1995

(PR1612)

PROPOSED RULE 1612. CREDITS FOR CLEAN ON-ROAD VEHICLES

(a) Purpose

The purpose of this rule is to provide opportunities to generate NOx, VOC, CO, PM, and SOx mobile source emission reduction credits (MSERC) that could be used as an alternative means of compliance with District regulations. These credits would be generated based on voluntary emission reductions created by the operation of low- or zero-emission on-road vehicles within the boundaries of the District that result in emission reductions beyond those required by local, state and federal regulations.

(b) Applicability

This voluntary rule becomes effective January 1, 1996 and applies to passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles which are registered and operated in the District, and for which optional emission standards have been specified in ARB's Mobile Source Credit Guidelines. References to ARB's Mobile Source Credit Guidelines or Title 13, California Code of Regulations correspond to the versions of the applicable guidelines/regulations which are in effect at the time of initial application for MSERCs.

(c) Definitions

For the purpose of this rule, the following definitions shall apply:

(1) BASELINE EMISSION STANDARDS mean the applicable ceiling emission standards, baseline vehicle emissions, or certification emission standard of the original vehicle (if retrofitted) for light-, medium-, or heavy-duty vehicles or engines pursuant to ARB's Mobile Source Credit Guidelines.

(2) CERTIFIED CONVERSION KIT means any alternative fuel or add-on hardware conversion (retrofit) kit which has been certified by the ARB to meet the heavy-duty vehicle optional emission standards specified in Title 13, California Code of Regulations. For light- and medium-duty vehicles, certified conversion kit means any alternative fuel or add-on hardware conversion (retrofit) kit which has been certified by the ARB to meet one of the low-emission vehicle standards as specified in Title 13, California Code of Regulations.

(3) CLEAN FUEL means any fuel for which the vehicle or engine was certified to an optional emission standard.

(4) CLOSED FUELING SYSTEM means an onboard vehicular emission control system that completely eliminates evaporative emissions under any and all possible operational modes and conditions.

(5) CONVERSION FACTOR means the multiplicative factor used to convert grams per brake horsepower-hour (g/bhp-hr) into grams per mile (g/mi).

(6) DUAL-FUEL VEHICLE means a vehicle that is engineered and designed to be capable of operating on gasoline or diesel and on compressed natural gas or liquefied petroleum gas, with separate fuel tanks for each fuel onboard the vehicle.

(7) ENGINE LIFE means the period of use (in miles) to which a given engine must comply with its certification emission standards, pursuant to ARB regulations specified in Title 13, California Code of Regulations. For new heavy-duty engines, the engine life shall be equal to the engine's useful life, pursuant to Title 13 California Code of Regulations. For retrofitted heavy-duty engines, the engine life shall be equal to miles remaining until the engine is next expected to be overhauled, or the expiration of the engine's original useful life, whichever occurs first.

(8) EVAPORATIVE EMISSIONS means VOCs emitted into the atmosphere from a vehicle, other than exhaust and crankcase emissions.

(9) EXTENDED ENGINE LIFE means the period of use (in miles) after a major engine overhaul during which a given engine must comply with its certification emission standards as specified by the vehicle operator. The extended engine life shall be not be greater than the engine's original useful life, pursuant to Title 13 California Code of Regulations.

(10) FUEL-FLEXIBLE VEHICLE means any methanol-fueled or ethanol-fueled vehicle that is engineered and designed to be operated using any gasoline-methanol or gasoline-ethanol fuel mixture or blend.

(11) HIGH-MILEAGE FLEET means a vehicle fleet (two or more vehicles assigned to a vehicle operator) whose average VMT is greater than the VMT quantified for that fleet as determined by the most current version of ARB's EMFAC/BURDEN emission inventory model.

(12) LOW-EMISSION VEHICLE means a light- or medium- duty vehicle that is certified by the ARB to one of the low- emission standards as specified in Title 13, California Code of Regulations, or a heavy-duty vehicle that is equipped with an engine certified by ARB to one of the optional emission standards as specified in Title 13, California Code of Regulations.

(13) MAJOR ENGINE OVERHAUL means a complete rebuilding of a low-emission vehicle engine such that the engine is returned to a condition that is equivalent in operation, durability, and emissions performance to the originally certified engine, by cleaning, adjustment, repair, and major component replacement of the engine which are considered to be beyond routine maintenance procedures.

(14) MARKETING EMISSIONS means VOC emissions emitted into the atmosphere from the transport of gasoline or other fuels used to power on-road vehicles, from the fuel's point of origin to the vehicle refueling site, occurring within the South Coast Air Quality Management District.

(15) MOBILE SOURCE EMISSION REDUCTION CREDIT (MSERC) means credits for real, quantified emission reductions in accordance with the Air Resources Board's Mobile Source Credit Guidelines, approved by the Executive Officer or designee, that can be used to comply with District Regulations pursuant to subdivision (g), and are surplus to emission reductions required by ARB, District, or U.S. EPA regulations.

(16) NITROGEN OXIDES (NOx) mean the sum of nitric oxides and nitrogen dioxides emitted, calculated as nitrogen dioxide.

(17) OPTIONAL EMISSION STANDARDS mean the applicable vehicle or engine certification emission standards, as specified by ARB's Mobile Source Credit Guidelines, which are more stringent than the baseline emission standard.

(18) REPOWER means to replace the existing on-road heavy-duty vehicle engine with an engine certified to meet one of the optional emission standards.

(19) RETROFIT means a hardware modification to an existing heavy-duty engine, according to the most recent version of ARB's California Certification and Installation Procedures for Alternative Fuel Retrofit Systems for Motor Vehicles Certified for 1994 and Subsequent Model years and for All Model Year Motor Vehicle Retrofit Systems Certified For Emission Reduction Credit (ARB Retrofit Procedures), that results in compliance with one of the ARB's optional emission standards. For light- and medium-duty vehicles, retrofit means a hardware modification to an existing vehicle, according to ARB Retrofit Procedures, that results in compliance with one of the low-emission vehicle standards as specified in Title 13, California Code of Regulations.

(20) VEHICLE LIFE means the period of use (in miles) during which a given vehicle must comply with its certification emission standards, pursuant to ARB regulations specified in Title 13, California Code of Regulations. For retrofitted passenger cars, light-duty trucks, and medium-duty vehicles, the vehicle life shall be equal to the useful life of the vehicle, according to Title 13 California Code of Regulations minus the actual vehicle odometer reading upon retrofit. The vehicle life for zero-emission vehicles shall be the period of time beginning when the vehicle is first placed in operation for the purpose of generating MSERCs and extending until the zero-emission vehicle is permanently retired.

(21) VEHICLE OPERATOR means any entity who leases for at least one year or owns on-road vehicles, and controls the operation of on-road vehicles within the boundaries of the District.

(22) VOLATILE ORGANIC COMPOUND (VOC) means any volatile compound of carbon; excluding methane, carbon monoxide, carbon dioxide, carbonic acid, metallic carbides or carbonates; ammonium carbonate, and exempt compounds as defined in District Rule 102.

(23) ZERO-EMISSION VEHICLE (ZEV) means any vehicle which produces zero emissions of any criteria pollutants under any and all possible operational modes and conditions.

(d) Vehicle Operator Requirements

In order to generate MSERCs, a vehicle operator shall:

(1) implement one or more of the following projects that result in exhaust, evaporative, or marketing loss emission reductions surplus to those required by ARB, District and U.S. EPA regulations:

(A) operation of new heavy-duty vehicles powered with engines certified to optional emission standards.

(B) operation of repowered heavy-duty vehicles with engines certified to optional emission standards.

(C) operation of passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles, retrofitted to comply with optional emission standards using certified conversion kits, and using manufacturer approved facilities for the installation of the certified conversion kits ("manufacturer" refers to the certified conversion kit manufacturer).

(D) operation of zero-emission vehicles, where operation of the light-duty zero-emission vehicles will not be used by any vehicle manufacturer for current or future compliance with its fleet average non-methane organic gas emission standards as specified in Title 13, California Code of Regulations.

(E) operation of vehicles which emit at levels corresponding to one or more applicable optional emission standards, as demonstrated according to ARB certification test methods by the vehicle operator and as approved by the Executive Officer or designee.

(F) operation of new low- or zero-emission passenger cars, light-duty trucks, medium-duty vehicles, or heavy-duty vehicles that results in evaporative and marketing loss emission reductions. (MSERCs from exhaust emission reductions are excluded from this operation.)

(G) operation of any (new, retrofitted, or repowered) low- or zero-emission vehicle in a high mileage fleet.

(2) for projects which begin operation after rule effective date, submit an On-Road MSERC Application, as specified in subdivision (e), within 90 days subsequent to initial operation of each low-emission vehicle.

(3) for projects which begin operation prior to rule adoption, submit an On-Road MSERC Application, as specified in subdivision (e) within one year of the rule effective date.

(4) following approval of the On-Road MSERC Application, demonstrate the operation of the low- or zero-emission vehicle to the satisfaction of the Executive Officer or designee by submitting the actual vehicle miles travelled (VMT) for the six-month period following the initial service date, and the projected VMT for the subsequent six-month period.

(5) annually renew the MSERCs by submitting the actual VMT for each preceding twelve-month period and the projected VMT for each subsequent six-month period.

(6) notify the Executive Officer or designee in writing within 90 days following retirement of the low- or zero-emission vehicle, or removal of the vehicle from service for an engine replacement or a major engine overhaul. For a major engine overhaul, such notification shall specify the extended engine life. The vehicle operator shall ensure that engine replacements and major engine overhauls are performed in accordance with specifications and procedures required by the engine or retrofit system manufacturer(s). The operator shall also be responsible for maintaining the engine and any retrofit systems within manufacturer(s)' specifications throughout the engine life.

(e) On-Road MSERC Application

(1) In order to obtain MSERCs, a vehicle operator shall submit an On-Road MSERC Application. The purpose of the Application is to document the purchase, retrofit, or repowering as well as the operation of the low- or zero-emission vehicle(s) following the initial service date. The On-Road MSERC Application shall contain specific information including, but not limited to:

(A) a description of the repowering, retrofitting, or purchasing project, including, at a minimum, the vehicle and engine model and model year, vehicle identification number, number of miles accumulated on the vehicle and engine (not applicable for new vehicle purchases), and applicable baseline and optional emission standards;

(B) proof of purchase or lease for the low- or zero-emission vehicle/engine or certified conversion kit purchase;

(C) the initial service date of each low- or zero-emission vehicle;

(D) identification of the legal owner of the MSERCs to be issued by the Executive Officer or designee;and

(E) intended use of MSERCs pursuant to subdivision (h), if known.

(2) The Executive Officer or designee shall approve or disapprove the On-Road MSERC Application in writing.

(f) Issuance of MSERCs

(1) MSERCs shall be issued after approval of the On-Road MSERC Application by the Executive Officer or designee and upon submittal and verification by the Executive Officer or designee of the actual and projected VMT for each low- or zero emission vehicle as specified in paragraphs (d)(4) and (d)(5) and in accordance with the MSERC calculation methodology specified in subdivision (g). For projects involving purchasing prior to rule adoption, MSERCs shall be issued based only on the operation of the low- or zero-emission vehicles which occur following the submittal of the On-Road MSERC Application.

(2) For projects involving the purchase of low- or zero emission vehicles after adoption of the rule, MSERCs shall be issued by the Executive Officer or designee based on continued demonstration of the actual operation of each low- or zero-emission vehicle. This demonstration shall start when the vehicle is first placed into service, and shall end at the end of the vehicle life, engine life, or extended engine life. The demonstration shall also end when the vehicle is retired or removed from service for an engine replacement.

(3) For projects involving the purchase of low- or zero emission vehicles prior to the adoption of the rule, MSERCs shall be issued by the Executive Officer or designee based on continued demonstration of the actual operation of each low- or zero-emission vehicle. This demonstration shall start when the On-Road MSERC Application is submitted to the District, and shall end at the end of the vehicle life, engine life, or extended engine life. The demonstration shall also end when the vehicle is retired or removed from service for an engine replacement.

(4) For all projects, MSERCs shall be issued by the Executive Officer or designee:

(A) for NOx, VOC, CO, and PM in accordance with paragraph (g)(1), if optional emission standards have been specified in the ARB's Mobile Source Credit Guidelines, or if compliance with applicable optional emission standards can be demonstrated as approved by the Executive Officer or designee according to ARB's certification test methods.

(B) for VOC, in accordance with paragraph (g)(2), for evaporative and marketing emission reductions resulting from the use of non-volatile fuels or closed fueling systems.

(C) for SOx, in accordance with paragraph (g)(3), for emission reductions resulting from the use of low-sulfur fuels.

(5) If a heavy-duty engine is overhauled, MSERCs shall be issued based on continued demonstration of the actual operation of each low- emission vehicle during the extended engine life.

(g) MSERC Calculation

(1) The total amount of NOx, CO, VOC, and PM MSERCs generated for exhaust emission reductions when a strategy specified in subparagraphs (d)(1)(A) through (d)(1)(F) is implemented shall be calculated by the Executive Officer or designee for each year according to the following formulas.

(A) For chassis certified passenger cars, light-duty trucks, and medium-duty vehicles:

MSERC = [(Sbase - Sopt) X ML] /(454 X DF)

where

MSERC = Mobile source emission reduction credits (pounds per year)

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) (grams per mile).

Sopt = The applicable optional emission standards for passenger cars, light- and medium-duty vehicles (grams per mile)

ML = Annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

(B) For engine certified medium- and heavy-duty vehicles:

MSERC = [((Sbase X CF1) - (Sopt X CF2)) x ML] /(454 X DF)

where

MSERC = Mobile source emission reduction credit (pounds per year)

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) g/bhp-hr).

Sopt = The applicable optional emission standards for engines used in medium- and heavy-duty vehicles (g/bhp-hr)

CF1 = Conversion factor associated with the fuel used to power an engine certified to the Sbase emission standard (bhp-hr/mile)

CF2 = Conversion factor associated with the fuel used to power an engine that has certified to the Sopt emission standard (bhp-hr/mile)

ML = Annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

(2) VOC MSERCs issued for evaporative and marketing emissions, when a strategy specified in paragraph (d)(1) is implemented, shall be calculated by the Executive Officer or designee according to the following formula:

MSERC = (EVP + ME) X (ML/VL) X (1/DF)

where

MSERC = Mobile source emission reduction credit (pounds per year)

EVP = Lifetime evaporative emission reduction (pounds)

ME = Lifetime marketing emission reductions (pounds)

ML = Annual VMT (miles/year)

VL = Vehicle life (miles)

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

Lifetime evaporative and marketing emissions needed to quantify MSERCs pursuant to this paragraph shall be obtained from the Executive Officer or designee.

(3) MSERCs issued for SOx emission reductions when a strategy specified in paragraph (d)(1) is implemented shall be calculated by the Executive Officer or designee according to the following formula:

MSERC = 2 X ((Fbase X Sbase) - (Fopt X Sopt))/DF

where

MSERC = Mobile source emission reduction credits (pounds per year)

Fbase = Amount of fuel used to power (applicable) vehicle certified to baseline emission standard (gallons or standard cubic feet per year).

Sbase = Sulfur concentration in fuel used to power (applicable) vehicle certified to baseline emission standard (pounds per gallon or pounds per standard cubic foot).

Fopt = Amount of fuel used to power vehicle certified to optional emission standard (gallons or standard cubic feet per year)

Sopt = Sulfur concentration in fuel used to power vehicle certified to optional emission standard (pounds per gallon or pounds per standard cubic foot).

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or 1.0 for NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

Sbase and Sopt shall be obtained from the Executive Officer or designee and shall be representative of average sulfur concentrations for applicable fuels within the boundaries of the District. Fbase and Fopt shall be submitted by the vehicle operator at the same time that annual VMTs are submitted to the Executive Officer or designee pursuant to paragraphs (d)(4) and (d)(5).

(4) The total amount of NOx, CO, VOC, and PM MSERCs generated for exhaust emission reductions when a strategy specified in subparagraph (d)(1)(G) is implemented shall be calculated by the Executive Officer or designee for each year according to the following formulas.

(A) For chassis certified passenger cars, light-duty trucks, and medium-duty vehicles:

MSERC = (Savg - Sopt) X (MLv - MLm)/(454 X DF)

where

MSERC = Mobile source emission reduction credits (pounds per year)

Savg = For passenger cars and light-duty trucks, applicable NMOG (VOC) fleet average emission standard pursuant to ARB's Low-Emission Vehicle Regulation, or calculated fleet average NOx, CO, and PM emission standards determined by the projected mix of TLEVs, LEVs, ULEVs, and ZEVs as contained in ARB's Mobile Source Credit Document (grams per mile).

For medium-duty vehicles, calculated fleet average emissions based on mandatory sales requirements for LEVs and ULEVs as contained in ARB's Low-Emission Vehicle Regulation (grams per mile).

Sopt = The applicable optional emission standards for passenger cars, light- and medium-duty vehicles (grams per mile)

MLv = Vehicle specific annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

MLm = Vehicle specific annual VMT as determined by ARB's most current version of EMFAC/BURDEN emissions inventory model.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

(B) For engine certified medium- and heavy-duty vehicles:

MSERC = [((Sbase X CF1) - (Sopt X CF2)) x (MLv - MLm)] /(454 X DF)

where

MSERC = Mobile source emission reduction credit (pounds per year)

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) g/bhp-hr).

Sopt = The applicable optional emission standards for engines used in medium- and heavy-duty vehicles (g/bhp-hr)

CF1 = Conversion factor associated with the fuel used to power an engine certified to the Sbase emission standard (bhp-hr/mile)

CF2 = Conversion factor associated with the fuel used to power an engine that has certified to the Sopt emission standard (bhp-hr/mile)

MLv = Vehicle specific annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

MLm = Vehicle specific annual VMT as determined by ARB's most current version of EMFAC/BURDEN emissions inventory model.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

(5) For all projects,

(A) the MSERCs for the first year after the initial service date shall be calculated by the Executive Officer or designee based on the actual VMT for the six-month period following the initial service date and the projected VMT for the subsequent six-month period. For projects involving the purchase of low- or zero-emission vehicles prior to rule adoption, the initial service date shall be the submittal date of the On-Road MSERC Application.

(B) The projected VMT shall not be 50% greater than the actual vehicle miles travelled for the previous six-month period unless the vehicle operator provides documentation to the District that the projected VMT shall occur, as approved by the Executive Officer or designee.

(C) The MSERCs shall be adjusted to reflect the difference between the projected VMT reported in the previous year and the actual VMT for the same period.

(6) MSERCs for dual-fueled vehicles or fuel-flexible vehicles shall be based on the VMT resulting from operation of the vehicle on the clean fuel.

(7) MSERCs shall expire two years after the date of issuance.

(h) Use of MSERCs

(1) MSERCs may be used for any of the following applications:

(A) As RECLAIM Trading Credits. The Executive Officer or designee shall convert MSERCs to RTCs upon submission of MSERCs by the user.

(B) As an alternative method of compliance with District Regulation XI rules that have future compliance dates. MSERCs shall not be used to offset emission increases caused by the removal of emission control equipment or replacement of compliant with noncompliant materials subject to Regulation XI. MSERCs must be in existence and designated as an alternative method of compliance in advance of the compliance date.

(C) As an alternative method of compliance with District Regulation XV rules that allow the use of MSERCs in accordance with Regulation XV.

(D) As New Source Review (NSR) offsets for emission increases at new or modified facilities that are subject to Rule 1303 (b)(2) in accordance with the provisions of Regulation XIII. Pursuant to Rule 504, no variance or series of variances, including emergency and interim variances, shall be granted for a period in excess of 90 days from the initial granting of a variance, from a permit condition implementing a regulation XIII offset requirement if such permit condition is based upon the use of MSERCs.

(E) For voluntary retirement of MSERCs for air quality benefits.

(F) As an alternative method of compliance with any District regulations which specifically authorize the use of MSERCs.

(2) MSERCs shall only be consumed in the air basin where the vehicle operator is based.

(3) In order to use MSERCs for the applications listed in subparagraph (1)(B) of this subdivision, the user shall submit a compliance plan to the Executive Officer or designee. The purpose of the compliance plan is to demonstrate compliance with rule requirements, and specify the use of the MSERCs.

(4) The compliance plan shall contain the following information:

(A) Total MSERCs (attach certificates)

(B) Identification of the specific rule for which the alternative method of compliance is sought;

(C) The period of time for the alternative method of compliance;

(D) Number of MSERCs used to substantiate the alternative method of compliance;

(E) A quantification of emissions that would result from noncompliance with the rule identified in subparagraph (h)(4)(B), and documentation supporting the emission quantification.

(5) Supporting documentation (applicable for MSERC usage for Regulation XI rules) shall include, but is not limited to:

(A) A listing of equipment or materials that are the source of noncompliant VOC, NOx, CO, PM, or SOx emissions associated with the rule identified in subparagraph (h)(4)(B).

(B) a description and operating conditions of equipment listed in subparagraph (h)(5)(A) or composition and rate of use of materials listed in (h)(5)(A).

(C) emission rates associated with the use of equipment or materials listed in (h)(5)(A).

(D) a listing of equipment or materials that would result in compliance with the rule identified in (h)(4)(B).

(E) a description and operating conditions of equipment listed in (h)(5)(D) or composition and rate of use of materials listed in (h)(5)(D).

(F) emission rates associated with the use of equipment or materials listed in (h)(5)(D).

(6) The compliance plan shall be written on a form to be specified by the Executive Officer or designee.

(7) The Executive Officer or designee shall approve or disapprove the compliance plan. The plan shall be disapproved unless it demonstrates that an equivalent amount of emissions reductions are obtained through the alternative method of compliance.

(8) MSERCs may not be used as a method of compliance with Regulation XI rules until the Executive Officer or designee has approved the compliance plan.

(9) The user must renew the compliance plan prior to the expiration of the MSERCs upon which the plan is based.

(i) Recordkeeping Requirements

(1) Low- or zero-emission vehicle operators shall be responsible for storing and maintaining data records for each low- or zero-emission vehicle which generates MSERCs. For each low- or zero-emission vehicle, the data records shall include vehicle miles traveled per calendar year in the South Coast Air Quality Management District (for dual-fuel or fuel-flexible vehicles, miles traveled per year on clean fuel), maintenance and repair records, and any other necessary data as specified by the Executive Officer or designee.

(2) Low- or zero-emission vehicle operators shall maintain a copy of the data records described in paragraph (i)(1) for the two most recent years of operation for each low- or zero-emission vehicle which generates MSERCs.

(j) Compliance Auditing and Enforcement

(1) The Executive Officer or designee shall be afforded access in the District to audit any files or records created to comply with recordkeeping requirements specified in subdivision (i) or require vehicle operators to submit such records to the Executive Officer or designee upon request.

(2) The Executive Officer or designee shall be afforded access to inspect low- or zero-emission vehicles at vehicle operators' facilities. The Executive Officer or designee may require emissions testing at a designated emission test facility, at the District's expense, to determine compliance with Rule 1612 requirements for the generation of MSERCs.

(3) Violation of any provision of this rule, including falsification of information in the On-Road MSERC application or annual operating data, shall be grounds for the Executive Officer to disallow or void any MSERCs resulting from or associated with the violation, by disapproving or seeking revocation of the On-Road MSERC application, and shall be subject to the penalties specified in the Health and Safety Code for violation of District rules.

(k) Requirements for Public Notice

Following a completeness determination of the On-Road MSERC Application for the use of MSERCs as NSR offsets only, as provided in subparagraph (h)(1)(D), the Executive Officer or designee shall:

(1) perform the evaluations required to determine compliance with this regulation and make a preliminary written decision, as appropriate, as to whether or not MSERCs, to be used as emission reduction credits (ERC), should be approved or disapproved. The decision shall be supported by a succinct written analysis; and

(2) publish a notice by prominent advertisement in at least one newspaper of general circulation in the District stating the preliminary decision of the Executive Officer or designee and where the public may inspect the information. The notice shall provide 30 days from the date of publication for the public to submit written comments on the preliminary decision; and

(3) at the time notice of the preliminary decision is published, make available for public inspection at the District office the information submitted by the applicant, the supporting analysis for the preliminary decision, and the preliminary decision to grant or deny MSERCs and the reasons therefore. The confidentiality of trade secrets shall be considered in accordance with Section 6254.7 of the Government Code.

(l) Appeal of Disapproval of MSERC Issuance

An applicant may, within 30 days of receipt of notice of disapproval, request the hearing board to hold a hearing on whether the application was properly refused.

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

Draft Staff Report
Proposed Rule 1612 - Credits for Clean On-Road Vehicles

July 1995

Deputy Executive Officer

Planning, Transportation and Information Management

Barry R. Wallerstein, D. Env.

Director

Planning and Policy

Jack P. Broadbent

Manager

Planning and Policy

Henry Hogo

AUTHOR:

Planning and Policy
David Coel - Program Supervisor
Larry Irwin - A.Q. Specialist
Vasken Yardemian - Transportation Specialist

Reviewed by:

Denice Brue -SR. Deputy District Counsel

Carol Engelhardt - Deputy District Prosecutor

INTRODUCTION 1

BACKGROUND 2

Regulatory History 5

Technological Feasibility 10

SUMMARY OF RULE REQUIREMENTS 13

Strategies Qualifying for MSERC Generation 14

Application and Reporting Requirements 17

Issuance of MSERCs 19

MSERC Calculation Methodology 20

Use of MSERCs 26

Recordkeeping and Compliance 27

Emission Reduction 28

Cost-Effectiveness 29

PUBLIC COMMENTS 30

SUMMARY AND DRAFT FINDINGS 64

Summary 64

DRAFT FINDINGS REQUIRED BY THE CALIFORNIA
HEALTH AND SAFETY CODE 64

REFERENCES 66

I. INTRODUCTION

Since 1992, the South Coast Air Quality Management District (District) has been investigating opportunities to allow the generation of mobile source emission reduction credits (MSERCs) to provide additional flexibility for stationary sources. In concept, MSERCs would be issued for actions taken to reduce emissions in the mobile source sector, and then used as an alternative method of compliance with District rules.

In order to generate MSERCs, emission reductions need to meet the following basic criteria:

1. The reductions must not be required by law or regulation, or otherwise assumed to occur as part of District Air Quality Management Plan.

2. The reductions must be real, and quantified to an acceptable degree of certainty.

3. The life of the reduction must be reasonably established, and commensurate with the proposed use of the credit.

In concert with District efforts to investigate MSERCs, the Air Resources Board (ARB) in February 1994 adopted guidelines for MSERC generation and use, entitled "Mobile Source Emission Reduction Credits -- Guidelines for the Generation and Use of Mobile Source Emission Reduction Credits." These guidelines are intended for use by air quality districts to ensure that MSERC rules comply with state and federal law.

Included in the above guidance document are five detailed examples of MSERC generation programs. These include: the accelerated retirement of older vehicles; purchase of new low-emission buses; purchase of zero-emission vehicles; retrofitting passenger cars, light-duty trucks, and medium-duty vehicles to reduce emissions; and retrofitting heavy-duty vehicles and engines to low-emission configurations. Rule 1610 (Old-Vehicle Scrapping), which was adopted by the District's Governing Board in January 1993, implemented the MSERC strategy for the accelerated retirement of older vehicles. Proposed Rule 1612 incorporates many of the remaining MSERC strategies described in ARB's guidance document, including the purchase of new low-emission buses, retrofitting vehicles to low-emission configurations, and the purchase of zero-emission vehicles. In addition, Proposed Rule 1612 would allow MSERC generation for the purchase and use of any new low-emission heavy-duty vehicle (besides new low-emission urban buses) as well as the repowering of heavy-duty vehicles to low-emission configurations.

To qualify as a low-emission vehicle or engine, certification to a VOC1, NOX, or CO emission standard that is below the mandatory emission standard is required. These "optional" emission standards have been defined in regulation by ARB for the purpose of retrofitting passenger cars, light-duty trucks, and medium-duty vehicles into low-emission configurations, and the purchase of urban buses equipped with low-emission heavy-duty engines. ARB has yet to formally adopt optional emission standards for new low-emission heavy-duty engines (other than urban bus engines) and the retrofitting of heavy-duty vehicles to low-emission configurations. However, promulgation of these optional emission standards is expected in the summer of 1995.

II. BACKGROUND

The California Air Resources Board (ARB), which has the primary regulatory responsibility for the reduction of on-road motor vehicle emissions, classifies on-road vehicles as passenger cars, light-duty trucks, medium-duty vehicles, heavy-duty vehicles, urban buses, and motorcycles. The various classifications affected by Proposed Rule 1612 are generally delineated by the gross vehicle weight2 (GVW) and are described as follows.

Passenger cars (PC) are defined as any vehicle designed for the transportation of persons and having a designed capacity of 12 persons or less. There is no GVW rating limit for this vehicle class. Nearly 99 percent of passenger cars are powered with gasoline.

Light-duty trucks (LDT) are defined as any motor vehicle, rated at a GVW of 6000 pounds or less, which is primarily designed for purposes of transportation of property. Pickup trucks primarily fall into this category. Over 98 percent of LDTs are gasoline-powered.

Medium-duty vehicles (MDV) are defined according to GVW and model-year (MY). Pre-1995 MDVs are defined as vehicles weighing between 6,001 and 8,500 pounds GVW3 . Beginning with MY 1995, the MDV was expanded to include vehicles at GVWs of 6,001 to 14,000 pounds. MDVs in the 6,001- to 14,000-pound range primarily include pickup trucks, vans, and delivery trucks. Almost all of the vehicles in this weight category are fueled with gasoline.

Heavy-duty vehicles (HDV) are technically defined as any vehicle with a GVW of over 6,000 pounds. For this proposed rule, HDV will refer to vehicles with a GVW of over 8,500 pounds (for pre-1995 model year HDVs) or over 14,000 pounds (for 1995 model year and later HDVs), as a category distinct from MDVs. HDVs with GVWs between 14,000 and 33,000 pounds primarily include non-urban buses, single-axle and tandem-axle vans, tow trucks, utility trucks, and local short-haulers of water, beverages, fuel, food, furniture, and trash. These trucks operate on both diesel fuel and gasoline. Those with GVWs over 33,000 pounds are almost all diesel-fueled, and include large line haulers ("semi's") and large buses. ARB estimates that about 20 percent of HDV vehicle miles traveled (VMT) in California is generated by HDVs registered outside the state..

Urban buses (UBD) are defined as heavy-duty diesel-powered passenger-carrying vehicles with a load capacity of 15 or more passengers and intended primarily for intracity operation. These buses are used exclusively by transit agencies and usually have a GVW over 33,000 pounds.

Figures 1 and 2 indicate the vehicle population, vehicle miles traveled (VMT), and emissions inventory distributions for on-road mobile sources by vehicle class for the 1995 calendar year in the South Coast Air Basin (SCAB).

Considering all emission sources, on-road motor vehicles contribute approximately 50 percent to the total VOC and NOX emissions inventory, and about 75 percent to the CO emissions inventory.

Regulatory History

Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles

In 1990 the ARB adopted Low-Emission Vehicle regulations which established increasingly stringent certification emission standards for four new classes of passenger cars and light-duty trucks: transitional low-emission vehicles (TLEV), low-emission vehicles (LEV), ultra-low-emission vehicles (ULEV), and zero-emission vehicles (ZEV). For medium-duty vehicles ARB established low-emission standards for two new vehicle classes, designated as low-emission vehicles and ultra-low-emission vehicles.

The existing 1993 emission standards and the low-emission vehicle standards adopted for passenger cars and light-duty trucks (0 - 3,750 pounds GVW) are shown in Table 1.

Table 1

ARB Low-Emission Vehicle Standards
for PCs and LDTs (g/mi)

Vehicle Class NMOG CO NOx

1993 Standards 0.25 3.4 0.4
TLEV 0.125 3.4 0.4
LEV 0.075 3.4 0.2
ULEV 0.040 1.7 0.2
ZEV zero zero zero

Note: NMOG = Non-Methane Organic Gases; CO = Carbon Monoxide;
NOx = Nitrogen Oxides

Low-emission vehicle standards established in 1990 were made applicable to light- and medium-duty low-emission retrofit vehicles when ARB adopted amendments to regulations governing alternative fuel retrofit certification in May, 1992. These regulations are described in the document entitled "California Certification and Installation Procedures for Alternative Fuel Retrofit Systems for Motor Vehicles Certified for 1994 and Subsequent Model Years."

Urban Bus Engines

On June 10, 1993, new exhaust emission standards and test procedures were adopted by the ARB for heavy-duty diesel engines (HDDE) used for 1994 and subsequent model-year urban buses. These exhaust emission standards (along with previous model-year standards) are summarized in Table 2.

Table 2

Urban Bus Engine Emission Standards (g/bhp-hr)

Year THC* CO NOX PM**

1991-93 1.3 15.5 5.0 0.10
1994-95 1.3 15.5 5.0 0.07
1996+ 1.3 15.5 4.0 0.05

Notes: * THC = Total Hydrocarbons ** PM = Particulate matter

To provide the necessary regulatory framework for the generation of MSERCs from low-polluting HDVs, the ARB rulemaking also included optional NOX certification emission standards: from 0.5 to 3.5 grams per brake horsepower-hour (g/bhp-hr), in 0.5 g/bhp-hr increments (as optional to the mandatory 5-g/bhp-hr standard); and from 0.5 to 2.5 g/bhp-hr, in 0.5 g/bhp-hr increments (as optional to the mandatory 4-g/bhp-hr standard). Applicable mandatory and optional NOX emission standards are shown in Table 3.

Table 3

Mandatory and Optional NOX Emission Standards
For Urban Bus Engines

Type Current Future
Standard (g/bhp-hr) (g/bhp-hr)

Mandatory 5.0 4.0

Optional 3.5 2.5 3.0 2.0 2.5 1.5 2.0 1.0 1.5 0.5 1.0
0.5

Heavy-Duty Vehicles

The latest ARB revision to HDDE emission standards, as well as emission standards for previous model years, are summarized in Table 4. It should be noted that EPA emission standards for heavy-duty engines are equivalent to ARB standards, except that in 1998 the EPA NOX standard is reduced from 5 g/bhp-hr to 4 g/bhp-hr.

Table 4

Heavy-Duty Engine Emission Standards (g/bhp-hr)

DIESEL CYCLE

Model Year HC CO NOX PM

1985-87 1.3 15.5 5.1 --
1988-90 1.3 15.5 6.0 0.60
1991-93 1.3 15.5 5.0 0.25
1994+ 1.3 15.5 5.0 0.10

OTTO CYCLE

Model Year HC CO NOX PM

1987 1.9 37.1 10.6 --
1988-89 1.9 37.1 6.0 --
1990+ 1.9 15.5 5.0 --

To address this inconsistency between ARB and EPA regulations, on May 12, 1995, ARB issued proposed regulations which lower the mandatory NOX emission standard for all heavy-duty engines from 5 g/bhp-hr to 4 g/bhp-hr effective in the 1998 model year. ARB has also included in this proposed rulemaking optional NOX emission standards, similar to those already adopted for urban bus engines. These are illustrated in Table 5 for both diesel and otto cycle engines. The optional HDDE NOx emission standards were adopted by ARB on June 29, 1995.

Table 5

ARB Proposed
Mandatory and Optional NOX Emission Standards
For Heavy-Duty Engines

DIESEL CYCLE

Type Current Future
Standard (g/bhp-hr) (g/bhp-hr)

Mandatory 5.0 4.0

Optional 3.5 2.5 3.0 2.0 2.5 1.5 2.0 1.0 1.5 0.5 1.0
0.5

OTTO CYCLE

Type Current Future
Standard (g/bhp-hr) (g/bhp-hr)

Mandatory 5.0 4.0

Optional 2.5 1.5 2.0 1.0 1.5 0.5 1.0 0.5

ARB is also expected to allow the certification of HDDE retrofit systems to these optional NOX emission standards. ARB staff has indicated that this regulation is planned to be considered for adoption on July 27, 1995.

Other Federal/State/Local Regulatory Activities

The Federal Clean Air Act, as amended in 1990, encourages market-based approaches to facilitate the attainment and maintenance of the National Ambient Air Quality Standards (NAAQS). Accordingly, the EPA has recently published interim guidelines on the generation of MSERCs, with specific focus on the accelerated retirement of old vehicles, the implementation of clean-fuel fleets, and the use of low-emission buses. EPA has concluded that for areas which face relatively high stationary source control costs relative to mobile source control costs, there may be significant benefits to creating market-based programs which specifically allow for the trading of emission reduction credits from on-road mobile sources to stationary sources.

The Federal Energy Policy Act of 1992 (EPACT) requires fleets with light-duty vehicles (LDV) to purchase alternatively fueled LDVs at gradually increasing percentages scheduled over a period of years. EPACT went into effect for federal government agencies in 1993, and will take effect in 1996 for state government agencies and fuel providers. Beginning in the year 1999 or 2002, depending on the date of energy rulemaking, private fleets will also be included. Since EPACT aims at utilizing alternative domestic energy resources, with no emission standard changes required, this regulation would tend to enhance support of the Proposed Rule 1612 by indirectly promoting expansion of the alternative-fuel refueling infrastructure and not limiting the availability of any surplus emission reductions.

The State Implementation Plan (SIP) adopted on November 15, 1994 encourages the use of market-based control strategies for attainment and maintenance of ambient air quality standards. Some of the market-based strategies listed in the SIP which could be implemented via mobile source emission reduction trading programs include: (1) incentives to purchase or produce "cleaner" technology vehicles, (2) incentives to encourage retrofit emission control technology, and (3) incentives for alternative-fuel conversions.

District Rule 1610, Old Vehicle Scrapping, adopted in January 1993, was the first comprehensive MSERC program implemented by the District. This rule established a mechanism for the generation of VOC and NOX MSERCs when pre-1982 model year passenger cars and light-duty trucks are scrapped. MSERCs generated by this scrapping program can be used to comply with designated rules under Regulation XI, Source Specific Standards. (Regulation XI affects a variety of stationary sources, including oil refineries, power plants, and aerospace operations.) In addition, facilities under the Regional Clean Air Incentives Market (RECLAIM) program could also obtain Reclaim Trading Credits (RTC) by the generation or acquisition of NOX MSERCs.

Technological Feasibility

Converting Passenger Cars, Light-Duty Trucks, and Medium-Duty Vehicles to Low-Emission Configurations

Retrofitting vehicles with alternative fuel capability or add-on devices is an established industry. This is evidenced in the numerous fleets that are converted to dual-fuel operation, having the capability of operating on either of two fuels, gasoline or a less expensive fuel, usually liquefied petroleum gas (LPG) or compressed natural gas (CNG). Additionally, vehicles are converted to dedicated alternative-fuel operation. However, until the recent alternative-fuel retrofit regulation amendments in May 1992 by ARB, experience has shown that emissions of alternative-fuel retrofit vehicles deteriorated rapidly early in the vehicle's life span. As a result of these more stringent regulations, as well as the ARB's approval of guidelines for the generation of mobile source emission reduction credits by the low-emission retrofit of existing vehicles, retrofitting vehicles to low-emission configurations now has the potential to reduce mobile source emissions beyond what is required by federal, state, and local regulations. Except for ZEV conversions, there are currently no low-emission retrofit kits commercially available to convert an existing vehicle into a low-emission configuration. These kits may be available later in 1995 or in 1996. Also, it would be expected that the MSERCs issued as a result of this rule would help to partially offset the cost of the retrofit kits.

New Low-Emission Heavy-Duty Engines

Heavy-duty engines (HDE) powered with alternative fuels are commercially available for urban buses and heavy-duty vehicles and have the potential to be certified to optional NOX emission standards. NOX emission levels for these engines are substantially below the mandatory level of 5 g/bhp-hr. Examples of these engines and corresponding certification emission levels are as follows.

• The Cummins L10G operating on either compressed or liquefied natural gas (CNG OR LNG) employs a charge air cooler, turbocharger, oxidation catalytic converter, and an engine control module to achieve the following certification exhaust emission values for the 1995 model year: 0.2 g/bhp-hr NMHC, 0.4 g/bhp-hr CO, 1.8 g/bhp-hr NOX, and 0.02 g/bhp-hr PM.
• The Caterpillar 3306-G CNG engine utilizes an engine control module, turbocharger, charge air cooler, oxygen sensor, and a three-way catalytic converter to achieve the following certification exhaust emission values for the 1995 model year: 0.7 g/bhp-hr NMHC, 6.3 g/bhp-hr CO, 0.7 g/bhp-hr NOX, and 0.02 g/bhp-hr PM.
• A Tecodrive 7000 7.0 liter naturally aspirated CNG engine from Tecogen, Inc. employs a three-way catalyst to achieve the following certification exhaust emission values for the 1995 model year: 0.3 g/bhp-hr NMHC, 14.5 g/bhp-hr CO, and 1.4 g/bhp-hr NOX.
• A Ford 3-87L-ROO 7-liter engine operating on LPG utilizes secondary air injection and exhaust gas recirculation (EGR) to achieve the following certification exhaust emission values for the 1995 model year: 0.5 g/bhp-hr THC, 23.2 g/bhp-hr CO, and 2.8 g/bhp-hr NOX
• A CNG fueled engine (with cid 339) from Hercules for model year 1995 production is equipped with a powertrain control module and turbocharger. The certification exhaust emission values are 0.9 g/bhp-hr NMHC, 2.8 g/bhp-hr CO, 2.0 g/bhp-hr NOx, and 0.1 g/bhp-hr PM.
• A methanol-fueled engine (with cid 552) commonly known as DDC 6V92 from Detroit Diesel Corp. was certified in December 1992 for model year 1993 production. This engine is equipped with a powertrain control module, oxidation catalytic converter, turbocharger, charge air cooler. The certification exhaust emission values for the 1993 model year are 0.1 g/bhp-hr OMHCE, 2.1 g/bhp-hr CO, 1.7 g/bhp-hr NOX, 0.03 g/bhp-hr PM, and 0.072 g/bhp-hr formaldehyde.

In all, there are 12 or more HDEs that are currently ARB-certified to operate on alternative fuels, most of which are certified to operate on CNG. Another six natural gas-fueled engines and another LPG engine are planned for new or renewed certification in the next year or two.

Heavy-duty engines powered by diesel fuel need further development for certification to optional NOX emission standards. To comply with these more stringent emission standards, advanced technologies such as EGR and/or lean-NOx catalysts may need to be employed. Similarly, HDEs powered by gasoline will most likely need advancements in EGR and three-way catalytic converter technology to comply with the optional emission standards.

Methanol Heavy-Duty Vehicle Demonstration Programs. Many alternative-fueled heavy-duty engines have undergone development that incorporated in-use data from demonstration programs. One of the more comprehensive demonstration programs, focusing on methanol-fueled heavy-duty trucks, was initiated in 1988 by the District. By 1992, this project had accumulated over 210,000 combined miles of operation using seven types of engines in a variety of applications for eight host participants.

Types of applications include: dump truck, dump/sander, sludge hauler, refuse hauler, tractor/trailer for local delivery, and beverage delivery. Engines utilized in these truck applications include the Caterpillar 3306 DITA (methanol), Cummins L10 (methanol with 5 percent Avocet, an ignition improver), DDC 6V-92TA (M100), DDC 6L-71TA (M100), Navistar DT-466 (methanol and a blend of methanol and 15% gasoline), and Ford 6.6L MX spark ignition engine converted for operation on a blend of methanol and 15% gasoline. Some of the emission test results generated during this demonstration project are summarized in Table 6.

Table 6

Emissions Test Results on Methanol Engines
(g/bhp-hr)

Engine Model Fuel HC CO NOX PM

Caterpillar 3406 DITA M100 4.45 12.35 3.05 0.15
Navistar DT-466 M100 2.38 4.82 3.77 0.15
w/catalyst M100 0.06 0.06 3.52 0.05
DDC 6V-92TA 350 hp M100 2.00 3.80 2.60 0.20
DDC 6V-92TA 300 hp M100 2.20 3.20 2.90 0.11
w/catalyst M100 0.20 0.30 2.60 N/A
DDC 6V-92TA 300 hp M85 2.20 6.70 3.40 0.09
w/catalyst M85 0.60 1.10 3.30 N/A
Ford 6.6L MX M85 0.32 21.10 1.21 N/A

CNG Heavy-Duty Vehicle Demonstration Programs. Because of the potential to reduce NOx emissions by 50 percent or more, natural gas technologies have been strongly supported by the District, as well as other public and private organizations. In 1989, the District contracted BC Research to develop a low-emission CNG truck engine based on Caterpillar's 3306 natural gas generator-set engine. After being optimized for low emissions and high power, that engine was subsequently installed in a Kenworth dump truck, which is now being demonstrated in Vancouver, Canada.

Zero-Emission Bus Technology

Zero emission transit buses have been in service since 1991. Many of these transit are powered by batteries and have been built to provide shuttle services around the country. The batteries (lead acid) are recharged during the evening hours.

AB 2766, which was adopted in 1990, authorized the imposition of additional motor vehicle registration fees to fund programs to reduce air pollution from mobile sources. As a result of funding from the AB 2766 1994-95 work program, 18 zero-emission (electric) A-Z Buses, powered by a Westinghouse system on a chassis manufactured by Bluebird, will service 18 school bus districts. The buses are expected to begin operation in 1996.

A 20-seat fuel cell bus prototype, powered by a PEM fuel cell system, was built for demonstration in 1993 by Ballard Power Systems of British Columbia. Ballard has indicated that it is targeting 1998 for commercialization of fuel cell powered urban buses. Under a separate District program jointly funded with DOE and the U.S. Department of Transportation, a test-bed phosphoric acid fuel cell (PAFC) bus is now operational; and a second PAFC bus, now undergoing preliminary on-road testing, will be delivered to the District for service in mid-1995. The 50-kilowatt PAFC stack for these 30-foot buses operates on methanol reformate and is hybridized with a nickel-cadmium battery pack for peak power assistance and regenerative braking. This "near-zero-emission" technology will be taken to the next level of development by a team led by Georgetown University and International Fuel Cells using federal funding. DOE projects commercialization of fuel cell buses in the 2003 time frame.

III. SUMMARY OF RULE REQUIREMENTS

Proposed Rule 1612 provides a mechanism for the generation of VOC, NOX, CO, PM, and SOx MSERCs in exchange for the voluntary operation of low-emission vehicles in the District. Low-emission vehicles can be purchased new, or an existing vehicle can be retrofitted or repowered to a low-emission configuration. The proposed rule also allows for the generation of MSERCs based on the purchase of low- or zero-emission vehicles prior to rule adoption. Proposed Rule 1612 was crafted to be consistent with ARB guidelines pertaining to the generation and use of MSERCs, and with ARB regulations that define mandatory and optional emission standards for passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles. Proposed Rule 1612 establishes requirements for qualifying emission control strategies, credit issuance, credit usage, MSERC quantification, as well as recordkeeping and enforcement. The effective date of Proposed Rule 1612 is January 1, 1996.

The following is a discussion of specific rule provisions.

Strategies Qualifying for MSERC Generation

In order to generate MSERCs, vehicle operators are required to implement strategies incorporating the operation of low-emission vehicles that result in emission reductions surplus to existing ARB or District regulations. A description of each strategy is described below.

1. Operation of new heavy-duty vehicles (including urban buses) with engines certified to optional emission standards.

Implementation of this strategy would allow heavy-duty vehicle operators or other designated parties to generate MSERCs by the operation of new low-emission heavy-duty vehicles. The focus of this strategy will be the generation of NOX MSERCs because the levels of other heavy-duty vehicle pollutants, such as carbon monoxide, hydrocarbons, and particulate matter (PM), are already quite low and therefore the potential for quantifiable emissions savings for these pollutants would also be generally low. However, Proposed Rule 1612 does not preclude the generation of credits for these pollutants.

The current heavy-duty vehicle engine NOX emission standard beginning in 1994 is 5 g/bhp-hr and will decrease to 4 g/bhp-hr in 1998. Engines used in urban buses (a subset of heavy-duty vehicles) also are required to comply with a 5 g/bhp-hr NOX emission standard beginning in 1994; however, this standard is reduced in 4 g/bhp-hr in 1996.

As previously mentioned, ARB has already adopted optional NOX certification emission standards for urban bus engines, and has just recently adopted corresponding emission standards in June 1995 for all HDEs.

For the purposes of this rule, urban buses or other heavy-duty vehicles powered solely by electricity are assumed to comply with a 0.0 g/bhp-hr emission level. However, it should be noted that these vehicles must be certified by ARB at this emission level to qualify for MSERC generation.

2. Repowering heavy-duty vehicles (including urban buses) with engines meeting optional emission standards.

Implementation of this strategy would allow heavy-duty vehicle operators or other designated parties to generate MSERCs by repowering heavy-duty vehicles with engines certified to an optional NOX emission standard. Repowering means the replacement of a vehicle's engine with another engine rather than rebuilding the existing engine. Similar to the first strategy, the focus of engine repowering will be the generation of NOX MSERCs. This strategy could, for example, work well in a tour bus application, where the vehicles are frequently in service for up to 25 years, which is well beyond the life of the original engine. The ARB is currently developing guidelines for generating credits based on repowering heavy-duty vehicles.

3. Retrofitting passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles to enable compliance with optional emission standards.

This strategy would allow the generation of MSERCs for the operation of passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles that are retrofitted for compliance with ARB optional emission standards. Optional emission standards for retrofit systems designated for passenger cars, light-duty trucks and medium-duty vehicles were established in September 1990 when ARB adopted emission standards for four new classes of low-emission vehicles, and in May 1992 when ARB adopted amendments to the regulations and test procedures applicable to alternative fuel retrofit systems. The retrofit regulations specifically allows the certification of retrofit systems to one of the low-emission categories.

As mentioned previously, optional emission standards for the entire heavy-duty vehicle class have not been adopted by ARB. Thus the regulations allowing the certification of heavy-duty vehicle retrofit systems to optional standards have also not yet been established. It is expected that ARB will adopt revised retrofit regulations incorporating these optional emission standards in the summer of 1995.

It should be noted that the vehicle operator will also be responsible for ensuring that the retrofitting of vehicles to comply with optional emission standards is conducted based on the conversion kit manufacturer's specification sand procedures.

4. Operation of Zero-Emission Vehicles.

Operation of zero-emission vehicles is a potentially attractive strategy to generate MSERCs, which can then be sold in order to offset the higher costs associated with these vehicles relative to conventional vehicles. These ZEV development and commercialization efforts are being spurred by the ARB Low-Emission Vehicle (LEV) regulation. Vehicle manufacturers are required, as a result of this regulation, to produce and make available for sale a small number of the total new car sales as ZEVs every year beginning in 1998. Table 7 summarizes these requirements.

Table 7

ZEV Requirement in California

Year Percentage5

1998 2
1999 2
2000 2
2001 5
2002 5
2003+ 10

The LEV regulations also require vehicle manufacturers to comply with an increasingly stringent fleet standard for hydrocarbons (characterized as non-methane organic gases by ARB) beginning in 1994. Vehicle manufacturers must produce a combination of vehicles certified to varying emission levels in order to comply with this fleet average NMOG requirement. These could include transitional low-emission vehicles (TLEV), low-emission vehicles (LEV), ultra-low-emission vehicles, and zero-emission vehicles (ZEV). As part of this compliance strategy, vehicle manufacturers can elect to use the ZEVs produced for compliance with the mandatory sales requirement described above as part of their compliance demonstration with the fleet average NMOG standard.

Proposed Rule 1612 does allow the generation of MSERCs for the operation of ZEVs. However, to ensure that ZEV emission credit programs produce surplus emission reductions, the party applying for MSERCs must ensure that the ZEV manufacturer does not claim credit towards compliance with ARB's fleet average NMOG requirement as contained in the low-emission vehicle regulations. ARB suggests that the rights to the low-emission vehicle program credit be acquired from the vehicle manufacturer to ensure that double-counting of emission reduction benefits from ZEVs does not occur. The foregoing discussion may not apply if the ZEV was retrofitted (or upfitted) from a conventional gasoline-powered vehicle, by a company that is not performing these retrofits on behalf of an original vehicle manufacturer.

5. Operations of Vehicles Resulting in Evaporative Emission Reductions.

Operation of vehicles powered by fuels with non-volatile fuels, use of vehicles equipped with closed fuel systems, or zero-emission vehicles, have the potential to generate reductions in evaporative VOC emissions. Examples of strategies that have the potential to qualify for MSERCs from reductions in these emission reductions include retrofitting gasoline-powered vehicles to dedicated LPG or CNG operation, operation of new LPG- or CNG-fueled vehicles used in gasoline vehicle applications, and vehicles powered solely by electrochemical batteries. In addition, gasoline-powered vehicles have the potential to qualify for VOC MSERCs from reductions in evaporative emissions through the use of closed fueling systems (still in development).

Depending on which fuel is used, VOC MSERCs could potentially be issued for emission reductions in marketing emissions (i.e., emissions from the transportation of the fuel from its point of origin to the vehicle fuel tank). For example use of methanol, CNG, or LNG in gasoline vehicle applications could potentially qualify for marketing-emission related MSERCs.

6. Operation of Low-Emission Vehicles in High Mileage Fleets

The District will issue MSERCs for the operation of low-emission vehicles in high mileage fleets. To qualify for MSERC generation, these vehicles fleets (and the low-emission vehicle under consideration) must attain an overall average VMT above the assumed average VMT for the applicable passenger car, light-duty truck, medium-duty vehicle, and/or heavy-duty vehicle population in the South Coast Air Basin as contained in the most recent version of ARB's EMFAC/BURDEN emission inventory program.

7. Operation of Vehicles with Demonstrated Potential to Reduce Emissions

The District will issue MSERCs for reductions in exhaust and evaporative emission for low-emission vehicles without using ARB certified engines/vehicles or conversion kits. This is to allow the accelerated commercialization of promising emission control technologies/fuels within the District. In order for the District to consider MSERC generation, ARB certification methods would have to be followed with emission test results submitted and approved by the District.

Application and Reporting Requirements

Proposed Rule 1612 requires the party implementing a mobile source emission reduction strategy to submit an on-road MSERC application to the District, and have that application approved prior to the issuance of MSERCs. The purpose of the application is to ensure that the mobile source strategy to be implemented qualifies for MSERC generation, and the quantification of MSERCs is performed properly. The application should be approved by the Executive Officer prior to implementation of the MSERC generation strategy, to ensure that there is a common understanding between the vehicle operator and the District regarding strategy implementation, the amount of MSERCs to be generated, and requirements for the continued generation of MSERCs.

Specific information submitted as part of the application should include the following for each new, retrofitted, or repowered low-emission vehicle:

1. a description of the repowering, retrofitting, or purchasing project, including at minimum the vehicle and engine model and model year, vehicle identification number, number of miles accumulated on the vehicle and engine (not applicable for new vehicle purchases), and applicable mandatory and optional emission standards;

2. proof of purchase or lease of low-or zero-emission vehicle/engine or certified conversion kit purchase;

3. the initial service date of each low-emission vehicle;

4. identification of the legal owner of the MSERCs to be issued by the Executive Officer;

and

5. intended use of MSERCs

(if known)

The District may require additional information to ensure that the proposed strategy is viable in terms of producing surplus, quantifiable, and enforceable emission reductions.

In addition, the vehicle operator must submit annual vehicle activity reports to the District. The application is due no later than 90 days after one of the above strategies has been implemented. (Specific application requirements are described in the next section). The annual vehicle activity reports (i.e., miles traveled in the District for each low-emission vehicle) are made beginning six months after the low-emission vehicles have begun operation, and yearly thereafter. The first vehicle activity report must include actual vehicle miles traveled for the six-month period following the initial service date (i.e., when the low-emission vehicles began initial operation for MSERC generation) and projected vehicle miles traveled for the subsequent six-month period. The subsequent annual vehicle activity reports will include actual vehicle miles traveled for the preceding twelve month period and projected miles traveled for the subsequent six month period. The information contained in the vehicle activity reports is needed to ensure that the vehicle operator is issued with the proper number of MSERCs. It should be noted that vehicle operators will be responsible for providing the amounts of fuel used to power both the low-emission vehicle and the corresponding conventional vehicle at the same time that annual VMT date are submitted to the District. These date will be needed if the vehicle operators applies for SOx MSERCs.

Finally, the vehicle operator must notify the District within 90 days following retirement of the low-emission vehicle, or removal of the vehicle from service for an engine replacement or major engine overhaul. For a major engine overhaul or an engine replacement, the vehicle operator must ensure that such actions are conducted in accordance with engine or conversion kit manufacturer's specifications and test procedures.

Issuance of MSERCs

Following approval of the on-road MSERC application and the submission of the actual and projected vehicle miles traveled for the initial and subsequent six months of operation (to be submitted after six months of initial operation), MSERCs will be issued for the first year. For all subsequent years, MSERCs will be issued upon submission and approval of the actual and projected vehicle miles traveled for the previous twelve months and subsequent six month period, respectively. MSERCs will cease to be issued when the low-emission vehicle has been removed from service or the engine or vehicle life has been exceeded. Note that vehicle/engine life will be based on ARB useful life requirements as contained in Title 13, California Code of Regulations. In order for continued issuance of MSERCs following a major engine overhaul, the vehicle operator must notify the District that the overhauled engine has been renewed to a new engine/vehicle conditions in terms of emission performance and durability. Finally, the engine must be overhauled according to manufacturer specifications and procedures. It should be noted that the vehicle operator will still be held responsible for exceedance of certification emission standards as demonstrated by emission testing or failure/malperformance of emission related parts.

Credit life will be based on the continued operation of each converted or new low- or zero-emission vehicle, and will start when the vehicle is first placed into service and end when the vehicle is retired or repowered. However, for purchases of new low- or zero-emission vehicles that occur prior to rule effective date (January 1, 1996) credit life will start when the On-Road MSERC Application is submitted for District approval. Accordingly, for these projects, MSERCs will be based on the operation of the low- or zero-emission vehicle immediately after application submittal.

MSERCs will be issued for NOx, VOC, CO, PM, and SOx emission reductions if mandatory emission standards for these pollutants have been adopted for the applicable vehicles by the ARB, and optional emission standards have been specified in the ARB's mobile source credit guidelines for on-road vehicles. Credits for SOx emission reductions will be issued based on the sulfur content and the amount of the fuels used to power vehicles certified to baseline and optional emission standards.

As indicated earlier, new engines or conversion kits which have not been certified by ARB to meet one or more of the optional emission standards, may qualify for generating credits under the proposed rule provided that emissions test data for these engines or conversion kits is submitted to the District. In order to generate credits, such emissions testing must be conducted in based on the ARB's certification test methods and would be subject to District approval.

In order to increase flexibility under the proposed rule, MSERCs generated each year will expire after two years from the date of issuance.

MSERC Calculation Methodology

Except for low-emission vehicles used in high mileage fleet applications, the number of MSERCs generated through the operation of low-emission vehicles is a function of the vehicle miles traveled in the District and the difference between mandatory (or baseline) and optional emission standards. In addition, for heavy-duty engines, MSERCs generated will also be a function of the conversion factor used to convert engine based emission standards in grams per brake-horsepower hour into grams per mile. Note that the vehicle operator should obtain these conversion factors from ARB or the District and include them in their MSERC application. Finally, with regard to dual-fuel vehicles or fuel-flexible vehicles, MSERCs will only be generated for operation on the fuel (hereafter referred to as "clean fuel") used to certify the vehicle to an optional emission standard.

The definition of baseline emission standard, except as other noted, corresponds to the applicable ceiling emission standards, baseline vehicle emissions, or certification emission standard of the orginal vehicle )if retrofitted) for light-, medium, or heayv-duty vehicles or engines pursuant to ARB'sMobile Source Credit Guidelines. For new low-emission heavy-duty vehicles, the baseline emission standard(s) corresponsd to the mandatory emission standards in effect for the model year of the vehicles. For repowered vehicles, the baseline emission standard would correspond to the mandatory emission standards in effect for the vehicle/engine at the time the vehicle is repowered, unless otherwise indicated by the planned ARB guidance document on repowering. For retrofitted vehicles, the baseline emission standards correspond to the mandatory emission standards in effect when the vehicle/engine was originally certified by ARB. Finally, for zero-emission vehicles the baseline emission standard corresponds to the average emission rate of a new, emitting vehicle as described in ARB's Mobile Source Credit Guidelines.

The following is the formula used to calculate VOC, NOx, CO, and PM MSERCs for exhaust emission reductions for chassis certified passenger cars, light-duty trucks, and medium-duty vehicles:

MSERC = [(Sbase - Sopt) x ML] /(454 x DF).

where

MSERC = Mobile source emission reduction credits (pounds per year).

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) (grams per mile).

Sopt = Optional emission standards (grams per mile).

ML = Annual vehicle miles traveled in the District while operating on clean fuel.

DF = discount factor, equal to 1.0 for credits used for compliance with Regulation XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and Regulation XI rules

Note, the number 454 used in equation converts grams into pounds.

The following is the formula used to calculate VOC, NOx, CO, and PM MSERCS for exhaust emission reductions for engine certified medium- and heavy-duty vehicles:

MSERC = [((Sbase x CF1) - (Sopt x CF2)) x ML] /(454 x DF).

where

MSERC = Mobile source emission reduction credit (pounds per year).

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) g/bhp-hr).

Sopt = Optional emission standards (g/bhp-hr).

CF1 = Conversion factor associated with the fuel used to power an engine certified to the Sbase emission standard(bhp-hr/mile).

CF2 = Conversion factor associated with the fuel used to power an engine that has certified to the Sopt emission standard (bhp-hr/mile).

ML = Annual vehicle miles traveled in the District while operating on clean fuel.

DF = discount factor, equal to 1.0 for credits used for compliance with Regulation XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and Regulation XI rules

Note, the number 454 used in equation converts grams into pounds.

In addition to exhaust emission reductions, Proposed Rule 1612 includes a calculation methodology to determine evaporative emission benefits resulting from the use of nonvolatile fuels. Evaporative emissions specifically include non-tailpipe emissions caused by the vaporization of fuel from the vehicle (during operation or non-operation), and the vaporization that occurs into the atmosphere during the transport of the fuel from its point of origin to the vehicle's refueling site (marketing emissions). Currently, these emission benefits could potentially be claimed for (1) those fuels that have a very low vapor pressure relative to gasoline, (2) electric vehicles, and (3) those fuels which require the use of a closed fuel system (e.g., CNG and LPG). The following formula should be used to quantify these emission benefits:

MSERC = (EVP + ME) X (ML/VL) X (1/DF).

where

MSERC = Mobile source emission reduction credit (pounds per year).

EVP = Lifetime evaporative emission reduction (pounds).

ME = Lifetime marketing emission reductions (pounds).

ML = Annual VMT (miles/year).

VL = Vehicle life (miles).

DF = discount factor, equal to 1.0 for credits used for compliance with Regulation XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and Regulation XI rules

The emission factors used in this formula (e.g., EVP and ME) should be obtained from the Executive Officer.

The following is the formula used to calculate SOx MSERCs based on the sulfur content and the amount of fuels used to power vehicles certified to baseline and optional emission standards:

MSERC = 2 x ((Fbase x Sbase) - (Fopt x Sopt))/DF

where

MSERC = Mobile source emission reduction credits (pounds per year)

Fbase = amount of fuel used to power vehicles targeted for repowering, retrofitting, or permanent replacement (gallons or standard cubic feet per year)

Sbase = sulfur concentration in fuel used to power vehicles targeted for repowering, retrofitting, or permanent replacement (pounds per gallon or pounds per standard cubic foot)

Fopt = amount of fuel used to power low-emission vehicles (gallons or standard cubic feet per year)

Sopt = sulfur concentration in fuel used to power low-emission vehicles (pounds per gallon or pounds per standard cubic foot)

DF = discount factor, equal to 1.0 for credits used for compliance with Regulation XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and Regulation XI rules

Note, the number 2 used in the equation converts pounds of sulfur into pounds of SOx.

The sulfur content of fuels, supplied by the District, will represent average sulfur concentrations for applicable fuels used to power both converted (or new) low-emission vehicles.

A 1.2 discount factor is also applied to the emission reductions generated to comply with RECLAIM and Regulation XI rules which have future compliance dates to achieve net overall reductions and to account for the uncertainties associated with trading emission reduction credits from mobile sources, for compliance with stationary source emission reductions. For credits generated for compliance with Regulation XV rules, a 1.0 discount factor will apply since the same level of uncertainties would exist for using mobile source credits to comply with other mobile source reduction requirements. Also, for credits generated for compliance with NSR offsets, a 1.0 discount factor will apply because these credits are already discounted by a factor of 1.2.

The foregoing discussion basically applies for vehicles used in high mileage fleet applications, except that MSERCs will be based on the difference in VMT between the low-emission fleet vehicle and the VMT assumption used in the ARB/BURDEN inventory model (corresponds to the VMT of an average in-use vehicle). This value will be multiplied by the difference between the certification emission standards of the low-emission vehicle and the "mandatory" emission standard of the new vehicle that would have been purchased in lieu of the low-emission vehicle. Because of the complexities with the ARB's Low-Emission Vehicle Regulation as it relates to passenger cars, and light-duty trucks, this "mandatory" emission standard for VOC would be based on the NMOG fleet average standard as contained in ARB's Low-Emission Vehicle Regulation. For CO and NOx, the "mandatory" emission standard would be determined, using the projected sales mix of transitional low-emission vehicles, low-emission vehicles, ultra-low-emission vehicles, and zero-emission vehicles as contained in ARB's Mobile Source Credit Guidelines and the corresponding certification emission standards for each of these low-emission vehicle classifications.

The following describes that actual calculation procedure for passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles.

For chassis certified passenger cars, light-duty trucks, and medium-duty vehicles:

MSERC = (Savg - Sopt) X (MLv - MLm)/(454 X DF)

where

MSERC = Mobile source emission reduction credits (pounds per year)

Savg = For passenger cars and light-duty trucks, applicable NMOG (VOC) fleet average emission standard pursuant to ARB's Low-Emission Vehicle Regulation, or calculated fleet average NOx, CO, and PM emission standards determined by the projected mix of TLEVs, LEVs, ULEVs, and ZEVs as contained in ARB's Mobile Source Credit Document (grams per mile).

For medium-duty vehicles, calculated fleet average emissions based on mandatory sales requirements for LEVs and ULEVs as contained in ARB's Low-Emission Vehicle Regulation (grams per mile).

Sopt = The applicable optional emission standards for passenger cars, light- and medium-duty vehicles (grams per mile)

MLv = Vehicle specific annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

MLm = Vehicle specific annual VMT as determined by ARB's most current version of EMFAC/BURDEN emissions inventory model.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

For engine certified medium- and heavy-duty vehicles:

MSERC = [((Sbase X CF1) - (Sopt X CF2)) x (MLv - MLm)] /(454 X DF)

where

MSERC = Mobile source emission reduction credit (pounds per year)

Sbase = Baseline emission standards (or certification emission standard of original vehicle if retrofitted) g/bhp-hr).

Sopt = The applicable optional emission standards for engines used in medium- and heavy-duty vehicles (g/bhp-hr)

CF1 = Conversion factor associated with the fuel used to power an engine certified to the Sbase emission standard (bhp-hr/mile)

CF2 = Conversion factor associated with the fuel used to power an engine that has certified to the Sopt emission standard (bhp-hr/mile)

MLv = Vehicle specific annual VMT in the South Coast Air Quality Management District while operating on clean fuel.

MLm = Vehicle specific annual VMT as determined by ARB's most current version of EMFAC/BURDEN emissions inventory model.

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for compliance with REG XI rules or RECLAIM.

USE of MSERCs

In order to provide maximum flexibility, the proposed rule allows MSERCs to be used for the following applications:

1. RECLAIM Trading Credits;

2. Alternative method of compliance with District Regulation XI rules with future compliance dates, except that MSERCs cannot be used to offset emission increases caused by the removal of emission control equipment or the replacement of compliant with non-compliant materials;

3. Alternative method of compliance with Regulation XV rules that allow the use of MSERCs in accordance with Regulation XV;

4. As New Source Review (NSR) offsets for emission increases at new or modified facilities that are subject to Rule 1303 (b)(2), pursuant to provisions in Regulation XIII; in addition, pursuant to Rule 504, no variance or series of variances, including emergency and interimvariances, shall be granted which would allow emissions to exceed an applicable Regulation XIII offset threshold for aperiod in excess of 90 days from the inital granting of a variance;

5. Voluntary retirement of MSERCs for air quality benefits; and

6. Alternative method of compliance with District regulation which allows the use of credits.

Because of the lack of a mechanism to convert MSERCs into emission reductions for Regulation XI purposes, the user is required to submit a compliance plan which will demonstrate that equivalent emission reductions are achieved through the use of MSERCs.

Also, in order to prevent inter-basin trading of credits, MSERCs must be consumed only within the air basin where the vehicle operator is based.

Recordkeeping and Compliance

Compliance measures are necessary to ensure that the operation of the low-emission vehicles result in real emission reductions throughout the credit life. Vehicle operators will be required to maintain data records for all vehicles through their useful life, and make these records available for District audit upon request. Specifically, vehicle data records shall document maintenance and repair activities, at a minimum, and any other necessary data as requested by the Executive Officer or designee. Such records must be maintained for the two most recent years of operation for each low-emission vehicle.

For purposes of ensuring compliance with the proposed rule, the District may audit relevant records and files. In addition, vehicle operator facilities may be inspected to verify the vehicle operation. The District may also require emission testing of the low-emission vehicle, at an approved designated facility and at District's expense, to verify continued compliance with optional emission standards. The vehicle operator will only be responsible for transporting the low-emission vehicle at his/her expense to and from the test facility, and any emission control system repairs needed to allow the vehicle to pass emission testing. Also, the vehicle operator is responsible for any expense incurred due to the unavailability of the low-emission vehicle during emissions testing.

Requirements for Public Notice

As required by state law, the issuance of MSERCs to be used as ERCs for compliance with NSR offsets must undergo a public notice review and comment period prior to final approval. Following a completeness determination of the On-Road MSERC Application and prior to issuing a public notice, the District is required to determine compliance with the provisions of this rule and specify in writing whether the MSERC Application should be approved or disapproved. A notice in at least one newspaper of general circulation in the District must then be published specifying the District's determination. The notice shall provide 30 days from the date of publication for the public to submit written comments on the preliminary decision. The District will make available for public inspection all information submitted by the applicant, supporting analysis for the preliminary decision, and the preliminary decision to grant or deny the MSERCs.

Appeal of Disapproval of MSERC Issuance

In order to provide an applicant a mechanism to appeal the District's decision to disapprove the On-Road MSERC Application, the applicant may, within 30 days of receipt of a notice of disapproval, request the hearing board to hold a hearing on whether the application was properly disapproved.

Emission Reduction

The overall emissions reduction potential from this proposed rule would be proportional to the number, types and activity of the low-emission vehicles repowered, retrofitted, or purchased, as well as the optional and mandatory emission standards for each low-emission vehicle. Due to the voluntary nature of this proposed rule, these parameters would be a function of the marketability of MSERCs, technological feasibility, and other factors unique to a vehicle operator contemplating participation in a low-emission vehicle program. As an example of the potential emission reduction from a low-emission vehicle program, ARB has developed hypothetical scenarios for replacing diesel buses with alternative-fuel buses. These scenarios are detailed in their MSERC Guidance Document dated February 1994. In one scenario, a methanol- or CNG-powered bus certified at a 2.5 g/bhp-hr NOX standard replaces a diesel bus certified at a 5 g/bhp-hr NOX standard, resulting in a lifetime emission benefits per bus of about 6 tons (0.5 tons per year), assuming a 12-year lifetime.

Cost-Effectiveness

The cost-effectiveness of this rule depends on which strategy is being implemented, cost of implementation, and lifetime emission benefits. Using the scenario described above, cost of implementation would be a function of vehicle capital cost, fuel cost, maintenance cost, fuel economy, and refueling infrastructure cost. Based on specific cost assumptions in ARB's February 1994 MSERC Guidance Document, cost-effectiveness of low-emission CNG urban buses would range from $1,300 to $16,000 per ton of NOX reduced.

The proposed rule provides an alternative, and in some cases a less costly, method of compliance with District's emission reduction requirements. Cost-effectiveness will be the primary criteria for vehicle operators in determining whether to comply with District regulations by meeting their specific requirements or by generating credits under the proposed rule. Therefore, vehicle operators, interested in participating in this voluntary credit program, must consider the cost of compliance with District regulations as compared to the cost of generating MSERCs, based on their specific operational conditions and compliance requirements, and select the most cost-effective option.

PUBLIC COMMENTS

The District Staff held a public workshop on June 14, 1995 to solicit public input and comments on Proposed Rules 1620 and 1612 (Credits for Clean On-Road Vehicles). A total of 74 persons attended the workshop. Both oral and written comments were presented at the workshop or submitted prior to the close of the comment period (June 28, 1995). Because of the issues raised at the workshop, a public consultation meeting was held on July 6, 1995 to solicit further public input on these issues. The public was invited to provide further written comments by July 20, 1995. The following is a list of all commentators who commented on Proposed Rules 1620 and 1612. Some commentators commented on both rules where others provided comments on an individual rule only. Eighteen commentators commented on Proposed Rule 1612 or on both 1612/1620. The following section provides staff's responses to all comments received on Proposed Rule 1612.

List of Commentators

  Comment #                  Commentator                   Subject Rule     

      1        3M                                             PR1620        

      2        Antelope Valley Bus                            PR1612        

      3        Battery Automated Transportation               PR1612        

      4        California Air Resources Board             PR1612/PR1620     

      5        California Energy Commission               PR1612/PR1620     

      6        California Trucking Association                PR1612        

      7        City of Los Angeles                        PR1612/PR1620     

      8        Coalition for Local Environmental          PR1612/PR1620     
               Solutions and Competitive Economy                            

      9        Construction Industry Air Quality          PR1612/PR1620     
               Coalition                                                    

      10       Engine, Fuel, & Emissions Engineering      PR1612/PR1620     

      11       Los Angeles County Sanitation District     PR1612/PR1620     

      12       National Association of Fleet                  PR1612        
               Administrators                                               

      13       SCEC                                           PR1620        

      14       Shepherd Machinery Company                 PR1612/PR1620     

      15       Southern California Edison                 PR1612/PR1620     

      16       The Gas Company                                PR1612        

      17       UNOCAL                                     PR1612/PR1620     

      18       U.S. Environmental Protection Agency       PR1612/PR1620     

      19       Vinyard Engine Systems                         PR1612        

      20       Western States Petroleum                   PR1612/PR1620     

Comment #2-1 The District should consider issuing credit for the repowering of heavy-duty vehicles using older 8 to 10 g/bhp-hr NOx engines (pre-85 or pre-88 federal engines) with new 5 g/bhp-hr NOx engines, and basing the quantification of the credit on the difference between the original and replacement engines.

Response #2-1 Proposed Rule 1612 will be following the ARB Mobile Source Emission Reduction Credit Guidelines regarding this issue. MSERCs will only be issued if the replacement engine is certified to an optional emission standard. The District will continue to work with ARB, Antelope Valley Bus, and other interested parties to further investigate the possibility of issuing MSERCs based on the replacement of bus engines being certified to a mandatory emission standard. ARB is planning to issue additional guidance to air quality districts regarding the quantification of credits from repowering.

Comment #3-1 Vehicle lifetime for ZEVs at 100,000 miles is inappropriate. It should be much greater.

Response #3-1 Proposed Rule 1612 has been revised to address this comment. Basically the vehicle life for ZEVs will end when the vehicle is retired for MSERC generation purposes.

Comment #3-2 A ZEV may displace an "average vehicle" rather than a new vehicle in commuter applications, in terms of a leasing program. People may simply lease a vehicle for commuter purposes, and keep their existing car(s).

Response #3-2 The MSERC calculation methodology assumes that a new low- or zero-emission vehicle will displace a new "conventional" vehicle, consistent with ARB's Guidelines for the Generation and Use of Mobile Source Emission Reduction Credits. The District will consider alternatives if the ARB Guidelines are amended in the future to include this "average vehicle" replacement scenario.

Comment #3-3 Proposed Rule 1612 won't provide enough incentive for ZEV commercialization.

Response #3-3 The primary purpose of Proposed Rule 1612 is to provide MSERCs to comply with other District regulations. It will, in conjunction with other local, state and federal regulatory incentives, provide an additional inducement for companies to produce and sell these vehicles.

Comment #3-4 The proposed rule should allow for generation of credits based on upstream emissions and post 2003 ZEV requirements.

Response #3-4 Proposed Rule 1612 identifies those opportunities under which the District can issue MSERCsfor the operation of ZEVs, where the emission reductions are surplus to existing regulations. These include ZEVs that are not counted towards compliance with a manufacturer's NMOG fleet average, as specified in ARB's Low-Emission Vehicle Regulation. In addition, all ZEVs are eligible for VOC MSERCs for evaporative and marketing loss emission reductions regardless of compliance with ARB's Low-Emission Vehicle regulations.

Comment #3-5 A one year credit life limits the attractiveness of the emission reduction credits. The District should provide a greater amount of time for use of credits.

Response #3-5 In order to increase flexibility under the MSERC program, staff has included a provision in the rule which would allow the use or trading of credits generated in any year for up to two years. Several issues regarding the use of banked credits in future years, which may affect the ozone attainment demonstration, need to be addressed first. These issues will be addressed as part of the inter-credit trading study.

Comment #3-6 Vehicle operators should be able to retroactively apply for credits if the vehicles have demonstrated low emissions.

Response #3-6 Issuing MSERCs retroactively is not being considered for the proposed rule because the intent is to provide an incentive for vehicle operators to purchase low- or zero-emission vehicles or retrofit existing vehicles beyond what they would have done if such a credit program did not exist. However, in order to recognize past efforts, staff has revised the proposed rule to allow for generation of credits for those low- or zero-emission vehicles which were placed into service prior to the proposed rule effective date (January 1, 1996). For these projects, only the operation of low- or zero-emission vehicles which occurs after the proposed rule effective date and following submittal of the On-Road MSERC Application will be eligible for credits.

Comment #4-1 The definition for certified conversion kit references the optional emission standards specified in Title 13, California Code of Regulations. The optional emission standards must be approved by the ARB before any program can be implemented that grants credit for retrofitting a heavy-duty engine to a low-emission configuration. Therefore, it is recommended that this section be amended to clarify that the optional emission standards have not yet been approved by the Board. Upon approval by the Board, the language as it appears in this section is suitable.

Response #4-1 Clarifying language is not needed at this time since ARB has already adopted optional emission standards for heavy-duty engines, and the District Governing Board is planning to consider adoption of Proposed Rule 1612 in September.

Comment #4-2 Section (b)(3) defines clean fuel as the fuel that is used to certify a vehicle or engine to an optional emission standard. The term "clean fuel" connotes an alternative fuel. However, diesel fuel may also be used to certify a heavy-duty engine to one of the optional emission standards. We recommend that this definition be amended to express that any fuel may be used for certifying to an optional emission standard.

Response #4-2 The definition of clean fuel has been revised to allow any fuel to potentially qualify as a clean fuel.

Comment #4-3 Low-emission vehicle is defined as a light-, medium- or heavy-duty vehicle that is certified or is equipped with an engine certified to one or more of the optional emission standards. This definition needs clarification since the emission standards for low-emission light- and medium-duty vehicles are not optional standards. The following language for the definition of low-emission vehicle is recommended. Low-Emission Vehicle means a light- or medium-duty vehicle that is certified to one of the low-emission standards as specified in Title 13, California Code of Regulations, or a heavy-duty vehicle that is equipped with an engine certified to one of the ARB's optional emission standards.

Response #4-3 The definition of low-emission vehicle has been revised to incorporate the suggested language.

Comment #4-4 The definition of Mobile Source Emission Reduction Credits should be revised to state that emission reductions used for credit generation must be in accordance with the Air Resources Board's Mobile Source Credit Guidelines.

Response #4-4 The definition of Mobile Source Emission Reduction Credits has been revised to include the reference to the Air Resource Board's Mobile Source Credit Guidelines.

Comment #4-5 The definition of repower should reference heavy-duty on-road engines.

Response #4-5 The definition of repower has been revised to reference heavy-duty on-road engines.

Comment #4-6 The definition for retrofit needs clarification, since light- and medium-duty vehicles are certified on a chassis dynamometer and engines are certified on an engine dynamometer.

Response #4-6 The definition of retrofit has been changed to the following. Retrofit means a hardware modification to an existing heavy-duty engine that results in compliance with one of the ARB's optional emission standards. For light- and medium-duty vehicles, it is a hardware modification to an existing vehicle that results in compliance with the low-emission vehicle standards as specified in Title 13, California Code of Regulations.

Comment #4-7 The useful vehicle life for ZEVs should not be based on historical records. It should be 100,000 miles or ten years.

Response #4-7 Since MSERCs will be issued yearly based ultimately on actual VMT and the emissions from ZEVs do not deteriorate over time and mileage, the useful life of ZEVs will end when the vehicle is retired from service.

Comment #4-8 The definition of zero-emission vehicle needs clarification since it refers to an optional emission standard of zero grams per mile.

Response #4-8 The definition of ZEVs has been changed to the following. Zero-emission vehicle means any vehicle which produces zero emission of any criteria pollutants under any and all possible operational modes and conditions.

Comment #4-9 The section stating that mobile source emission reduction credit can be generated for the operation of ZEVs needs clarification, since credit can only be granted for ZEVs that have not been claimed for compliance with ARB's NMOG fleet average requirement.

Response #4-9 This section has been revised to the generation of MSERCs resulting from exhaust emission reductions when the operation of (light-duty) ZEVs will not be used by any vehicle manufacturer for current or future compliance with its fleet average non-methane organic gas emission standards, as specified in Title 13, California Code of Regulations.

Comment #4-10 The section describing requirements for "non-credit" pollutants needs clarification. In addition, language should be included in the proposed rule which requires the vehicle operator to demonstrate compliance with an appropriate in-use testing program.

Response #4-10 The section describing requirements for "non-credit" pollutants has been deleted, since vehicles certifying to more stringent optional emission standards would have to maintain the same level of emissions for the other "non-credit" pollutants, as part of the certification process. With regard to the in-use testing program, the District will require in-use testing on an as needed basis, with input from ARB.

Comment #4-11 Language should be included in the proposed rule that states that credit for the purchase of a zero-emission vehicle will be granted based on the difference between the average emission rate of a new, emitting vehicle and a zero-emission vehicle.

Response #4-11 The definition of Baseline Emission standards has been revised to incorporate this comment.

Comment #4-12 The equation for calculating MSERCs needs to be revised. Sopt should be amended to refer to the applicable optional emission standard for heavy-duty vehicles or the applicable low-emission vehicle standard for light- and medium-duty vehicles. Also, the definition of "ML" needs modification, since it refers to the VMT while operating on clean fuel.

Response #4-12 The comment regarding the MSERC calculation methodology was not incorporated because there are separate equations for chassis-based and engine-based emission standards. The comment regarding "ML" was not incorporated because clean fuel is defined as any fuel for which the vehicle or engine was certified to an optional emission standard.

Comment #4-13 The section describing how mobile source emission reduction credits will be calculated, based on VMT, needs clarification. It is unclear why credit issued after the first year is based on the actual VMT for each preceding twelve-month period and the projected VMT for each subsequent six-month period.

Response #4-13 The initial MSERC issuance is based on actual VMT for six months and projected VMT for the subsequent six month period. In order to "true-up" the amount of MSERCs when they are next issued, the preceding twelve months of actual VMT are needed to correct any discrepancy between the initial six month projected VMT and the actual VMT.

Comment #5-1 How would vehicles that use both conventional and alternative fuels together be treated, such as pilot injection natural gas heavy-duty engines and methanol-diesel flexible fuel vehicles, such as the one Caterpillar is developing.

Response #5-1 The vehicle or engine would have to be certified to one of ARB's optional emission standards on a fuel that is legal for sale in California, and that fuel (used in the certification process) must be consumed by the low-emission vehicle to generate MSERCs. In the case of a vehicle that operates on two distinct fuels, such as fuel-flexible vehicles or dual-fueled vehicles, the amount of MSERCs generated would be based on the vehicle miles traveled by the low-emission vehicle while operating on the "clean fuel" (the fuel that was used by the manufacturer to certify the vehicle or engine to the optional standard).

Comment #5-2 Use the term "rebuild" instead of overhaul with regard to heavy-duty engines.

Response #5-2 The terms rebuild and overhaul are interchangeable. Proposed Rule 1612 basically defines major engine overhaul as a complete rebuilding of a low-emission vehicle engine.

Comment #5-3 It is not clear how new low-emission light-duty vehicles are excluded from credit generation.

Response #5-3 Subdivision (d) of Proposed Rule 1612 lists those strategies that are eligible for MSERC generation. The purchase of new low-emission vehicles are eligible for MSERC generation when they are operated in high mileage fleet applications. Also, if a non-volatile fuel is used to power the vehicle, or the vehicle is equipped with a closed fuel system, the MSERCs can generated as well.

Comment #5-4 Proposed Rule 1612 should be designed to facilitate the purchase of new low-emission vehicles by allowing the issuance of MSERCs for the operation of these vehicles.

Response #5-4 Rather than provide emission reduction credits for new low-emission vehicles (unless the vehicles are used in high mileage fleet applications or non-volative fuels/closed fueling systems are utilized), the District is pursuing direct financial incentives for purchases of low- and zero-emission vehicles. For example, the District recently approved a six million dollar incentive program to subsidize the purchase of ZEVs, as well as eighteen million dollar program to subsidize the purchase of electric or alternative-fueled school buses.

Comment #6-1 The reporting requirements are burdensome and are a disincentive for participation in the program.

Response #6-1 Staff has created a streamlined application process and does not consider the annual renewal process to be too complex. In order for the District to adequately verify the continuing operation of the low- or zero-emission vehicles, and to issue appropriate credit amounts, it is necessary that yearly activity data, in the form of vehicle miles traveled (VMT) for each low-emission vehicles for the reporting period, be submitted to the District. The annual reporting of VMT is not expected to be an administrative burden to vehicle operators.

Comment #6-2 The life of the credit needs to be increased.

Response #6-2 The commentator is referred to the response to comment #3-5.

Comment #6-3 The 30 percent threshold below which credit standards begin will not encourage the commercialization of heavy-duty engines that could potentially comply with a 4 gram per brake horsepower-hour NOx standard before 1998.

Response #6-3 ARB established the 30 percent threshold to ensure that real emission reductions would be achieved for low-emission heavy-duty vehicles. Decreasing the 30 percent threshold might result in a conventional vehicle being eligible for MSERCs, because of the variability in certification emission data, without any modification to the engine.

Comment #6-4 Cross-pollutant trading of credits should be allowed.

Response #6-4 The issue of inter-pollutant trading is being evaluated by staff as part of the inter-credit trading study to be completed this fall. Upon completion of this study, the proposed rule will be revised if necessary.

Comment #6-5 The 20 percent discount factor is too high. The District should purchase credits if the 20 percent retirement of credits is needed.

Response #6-5 The proposed rule originally applied a 1.2 discount factor to the emission reductions generated from the program to account for uncertainties associated with emission factors and activity data as well as to achieve net emission reductions. Under the revised rule language, the 1.2 discount factor will only be applicable to credits generated for compliance with RECLAIM and Regulation XI rules, due to the inherent uncertainties with the crossover between mobile and stationary source emission reductions (i.e., trading mobile source emission reductions to comply with stationary source emission reductions). For credits generated for compliance with Regulation XV rules, a 1.0 discount factor will apply since a single level of uncertainty exists for using mobile source credits to comply with other mobile source emission reduction requirements. Finally, for credits generated to comply with NSR offsets, a 1.0 discount factor will apply since Regulation XIII already disounts credits by a 1.2 factor.

Comment #7-1 The recordkeeping requirements should be streamlined in order to maximize fleet operator participation.

Response #7-1 The recordkeeping requirements have been streamlined, and represent, in our view, the minimum requirements that are needed to ensure proper enforceability of the rule. The commentator is also referred to the response to comment #6-1.

Comment #7-2 The District should issue an optional one-time credit for clean-fuel vehicles operated by fleets operating strictly within the boundaries of the District.

Response #7-2 Proposed Rule 1612 issues MSERCs based on actual operation of the low-emission vehicle in the District. Both recordkeeping and reporting requirements are therefore required to ensure that appropriate amounts of credits are issued. Issuance of any optional one-time credit would not be enforceable since actual operation information must be obtained.

Comment #7-3 The District should revisit the issue of Health and Safety Code penalties for non-compliance with this voluntary rule. A more appropriate alternative should be identified that would not hinder fleet operator's progress toward further procurement of clean-fuel vehicles.

Response #7-3 In order to ensure that the provisions of this voluntary rule are complied with, vehicle operators who opt to participate in this program are subject to non-issuance and/or voidance of credits and/or non-compliance penalties. Under the Health and Safety Code, the District can exercise its right to use discretion in assessing an appropriate penalty for violation of the proposed rule.

Comment #7-4 Retroactive credit should be issued for fleet operators that have purchased clean fuel vehicles prior to rule adoption.

Response #7-4 The commentator is referred to the response to comment #3-6.

Comment #7-5 The District should consider allowing banking of MSERCs.

Response #7-5 The commentator is referred to the response to comment #3-5.

Comment #7-6 The staff report and the proposed rule should be consistent in terms of urban buses potentially qualifying for MSERC generation.

Response #7-6 Since the proposed rule uses the ARB definitions for heavy-duty vehicles, and urban buses are clearly classified as a heavy-duty vehicle, staff believes that the terms are consistent.

Comment #7-7 Additional MSERCs for PM, SOx, and CO should be provided for low-emission heavy-duty vehicles.

Response #7-7 Staff has amended proposed Rule 1612 to allow the MSERC generation of other pollutants besides NOx for diesel applications, provided that ARB has adopted an optional emission standard for that pollutant and the vehicle/engine is certified to that optional emission standard.

Comment #7-8 The definition of heavy-duty vehicles does not include 30 foot DASH urban buses.

Response #7-8 The definition of heavy-duty vehicles lists examples of vehicles that would qualify as heavy-duty vehicles and is not inclusive. As such, the commentator should use the gross vehicle weight to determine if a vehicle should be considered a heavy-duty vehicle.

Comment #7-9 It is not clear why the reference is made to the District rather than the South Coast Air Basin in terms documenting VMT for MSERC quantification. MSERCs should be used within the air basin in which they are generated.

Response #7-9 To address this comment, the rule language was revised to include a requirement that MSERCs shall only be consumed in the air basin where the vehicle operator is based.

Comment #7-10 Proposed Rule 1612 should identify the appeal process.

Response #7-10 An appeal process has been added to the proposed rule.

Comment #7-11 The 1.2 discount factor should be re-evaluated.

Response #7-11 The commentator is referred to the response to comment #6-5.

Comment #7-12 MSERCs should be issued for original equipment manufacturer (OEM) low-emission vehicle passenger cars and light-duty truck purchases.

Response #7-12 The commentator is referred to the response to comment #5-4.

Comment #8-1 Vehicle operators must have the ability to bank credits and use them for any year in the future to ensure that it is financially advantageous to convert to cleaner fueled engines.

Response #8-1 The commentator is referred to the response to comment #3-5.

Comment #8-2 The proposed rule should allow engine manufacturers to get credits, to ensure that it is financially advantageous to convert to cleaner fueled engines

Response #8-2 Staff considers the vehicle operator to be the primary party responsible for continued operation of the low- or zero-emission vehicle and thus the vehicle operator should receive full value for the credit issued under the proposed rule. The primary intent behind the proposed rule is to provide flexibility for local facilities to comply with District rules. Therefore, issuing credits to manufacturers, who are often located outside District, would increase the cost of the credits and result in reduced flexibility. However, staff will continue to examine this issue for future credit rules.

Regulation of on-road engines/vehicles is exclusively under the jurisdiction of ARB and U.S. EPA. Therefore, the District does not have the legal authority to either establish emission standards for on-road engines/vehicles or provide a mechanism for giving credits to the manufacturers as an alternative means of compliance with ARB and U.S. EPA regulations.

Comment #8-3 Keep discounting of emission credits to a minimum, to ensure that it is financially advantageous to convert to cleaner fueled engines.

Response #8-3 The commentator is referred to the response to comment #6-5.

Comment #8-4. Be flexible on verification of vehicle activity. Issue credits based on standardized activity assumptions, and true-up periodically.

Response #8-4 Staff considers the type of verification required under Proposed Rule 1612 to be necessary in order to accurately determine the amount of MSERCs to be issued. Standardized activity assumptions are not relied upon due to the variability of annual vehicle miles traveled per vehicle. The staff will monitor the variability of vehicle activity level during the early years of Rule 1612 implementation, and will propose amendments to the rule regarding the use of standardized activity assumptions if this is warranted.

Comment #9-1 We are concerned that contractors who participate in the credit program may get preferential treatment under CEQA guidelines. We also want assurance that the program will stay voluntary.

Response #9-1 The District has no control over which contractor is selected for a construction project involving the CEQA review process. It is up to the discretion of the individual project proponent to choose an appropriate contractor. Staff assumes that the selection process is competitive and we are unaware of any provision in the CEQA guidelines that would give preferential treatment to a contractor who participates in an MSERC program. However, there is nothing in the CEQA guidelines to preclude a lead agency from proposing mitigation measures for a project which may require emission offsets. These emission offsets could potentially take the form of MSERCs issued under Proposed Rule 1612.

With respect to the voluntary nature of the MSERC program, Proposed Rule 1612 is a voluntary program and as such is not intended to require any person to purchase, repower, or retrofit low- or zero-emission vehicles. The District's intent behind adopting the proposed rule is to provide opportunities to generate NOx, VOC, CO, PM, and SOx mobile source emission reduction credits that can be used as an alternative means of compliance with District regulations.

The District believes that the voluntary nature of proposed Rule 1612 is sufficiently communicated in subdivision (a), where it is stated that "These credits would be generated based on the operation of low- or zero-emission on-road vehicles, on a voluntary basis, that result in emission reductions beyond local, state and federal regulations."

Comment #9-2 The District is not clear with regard to the use of temporary ERCs under Regulation XIII.

Response #9-2 Staff believes that MSERCs generated under Proposed Rule 1612 can be used to comply with the emission offset requirements of Regulation XIII. The vehicle operator will be responsible for continually generating MSERCs on an on-going basis in order to satisfy the requirements of REG XIII. Permit conditions for new or modified facilities will reflect the requirement for these NSR offsets to be renewed annually.

Comment #10-1 What would be the obstacle to allowing operators of new light-duty vehicles certified to EPA's inherently low-emission vehicle standard to generate credits for the elimination of evaporative emissions and fuel marketing emissions?

Response #10-1 Proposed Rule 1612 has been revised to allow the generation of VOC MSERCs for evaporative and marketing emission reductions that may result from the use of non-volatile fuels or vehicles equipped with closed fuel systems.

Comment #11-1 Why can't use of credits be extended to Regulation IV?

Response #11-1 Regulation IV - Prohibitions, was not included as a potential use of MSERCs because most of the Regulation IV rules are prohibitory in nature, do not require emission reductions, or do not have future compliance dates.

Comment #11-2 Why can't inter-pollutant trading be allowed? It's allowed in Regulation XIII.

Response #11-2 The commentator is referred to the response to comment #6-4.

Comment #11-3 For diesel powered vehicles, why not allow credits for other pollutants including SOx, instead of just NOx.

Response #11-3 The commentator is referred to the response to comment #7-7.

Comment #11-4 Banking or credits beyond one year should be allowed.

Response #11-4 The commentator is referred to the response to comment #3-5.

Comment #11-5 The District should allow retroactive credits for existing programs.

Response #11-5 The commentator is referred to the response to comment #3-6.

Comment #11-6 The District should allow credits for OEM light-duty vehicles.

Response #11-6 The District has revised proposed Rule 1612 to allow the issuance of MSERCs for evaporative and marketing emission reductions from the use of non-volatile fuels or low-emission vehicles equipped with closed fuel systems. In addition, the District is allowing MSERCs for new OEM low-emission vehicles in high mileage applications.

Comment #11-7 The District should make recordkeeping requirements less stringent. For example, detailed maintenance records appear to be overly burdensome in terms of recordkeeping.

Response #11-7 The commentator is referred to response to comment #6-1.

Comment #12-1 The District should allow credits for OEM passenger cars, light-duty trucks, and medium-duty vehicles for evaporative and marketing emissions reductions. In addition credit for exhaust emission reductions should be issued based on use of low-emission vehicle in high mileage fleet applications. The credit would be based on the difference between the actual mileage of the low-emission vehicles and the ARB assumption that the "average" in-use vehicle accumulates 10,000 miles per year.

Response #12-1 The commentator is referred to the response to comment #11-6.

Comment #12-2 A self certification form needs to be used to document miles driven in the South Coast Air Basin.

Response #12-2 The commentator is referred to the response to comment #6-1.

Comment #12-3 With regard to the calculation of clean fuel use with a flexible fuel vehicle, the District should allow fleets to calculate such use either through the actual clean fuel purchased or a recordkeeping "safe harbor" method. For example, fuel consumption of M85 times the average MPG city/highway estimate for the particular vehicle to determine the VMT.

Response #12-3 The verification mechanism to be used for clean fuel use will be defined in the application for MSERCs. The District will take a practical approach with regard to documenting this clean fuel use, making sure it does not hinder vehicle operator participation in Rule 1612 low-emission vehicle programs.

Comment #12-4 The recordkeeping requirements in Proposed Rule 1612 are too burdensome. The District should require records for each vehicle based on its vehicle life plus an additional 12 months rather than require that all records be kept until the last low-emission vehicle is retired.

Response #12-4 The commentator is referred to the response to comment #6-1.

Comment #12-5 The definition of "Vehicle Operator" in proposed Rule 1612 should be revised to reflect the entity responsible for the management of vehicles with the authority to decide how vehicles are to be operated. This change would more accurately reflect the entity eligible to earn MSERCs. It is suggested that the term vehicle operator be defined to mean "any entity who leases or owns vehicles and controls the operation of on-road vehicles within the boundaries of the South Coast Air Quality Management District."

Response #12-5 Proposed Rule 1612 has been revised to address this comment.

Comment #12-6 The District should allow unlimited banking of credits, without expiration. Credits will be more attractive to companies if they can be banked and used at a later date.

Response #12-6 The commentator is referred to the response to comment #3-5.

Comment #14-1 The 1.2 discount factor should not be used in the MSERC quantification methodology. The current quantification methodology already addresses uncertainty of emissions deterioration.

Response #14-1 The commentator is referred to the response to comment #6-5.

Comment #14-2 Why use a six month projection in terms of VMT notification? A one year projection is more appropriate since there is no apparent significance with the six month time period.

Response #14-2 A six month VMT projection was selected to enable MSERC issuance approximately six months prior to when the actual VMT is generated. Staff believes that six months of actual VMT and six months of projected VMT provide a sufficient basis to issue MSERCs based on an entire year of low-or zero-emission vehicle operation. Basing the credit calculation on one year's worth of projected VMT does not provide a high level of confidence and results in less accuracy.

Comment #14-3 Use "verification" instead of "demonstration" with regard to documenting that operation of the low-emission vehicle will not increase emission of other pollutants beyond the standards specified in Title 13, California Code of Regulations.

Response #14-3 Proposed Rule 1612 has been revised to delete this requirement because the ARB certification process basically requires the same or greater level of stringency for each criteria pollutant for conventional and corresponding low-emission vehicles.

Comment #14-4 If emission testing is required, it should be at the District's expense, and not at the operator's expense; excepting such cases where there is cause to believe that non-compliance or fraud may be involved.

Response #14-4 Costs associated with the actual emission test will be the responsibility of the District. However, any expenses associated with this transporting the vehicle to the test facility will be the responsibility of the vehicle operator. In addition, the vehicle operator will be responsible for adjusting and/or repairing the vehicle if this becomes necessary to enable emission testing.

Comment #14-5 The incursion of penalties specified in the Health and Safety Code as a result of a failure to notify the District when an overhaul, engine replacement, or vehicle retirement occurs is too excessive. The District may want to add provisions in Rule 301 for assessment of fees rather than rely on the Health and Safety Code, which has very high penalties.

Response #14-5 The District wishes to maintain its right to use discretion in assessing a penalty for violations of the proposed rule. Reliance of the Health and Safety code offers the District such flexibility, while assessing a fee under Rule 301 allows no flexibility. Rule 301 is for payment of fees not penalties.

Staff does not consider Regulation III to be an appropriate mechanism for establishing penalties for non-compliance with the proposed rule. Regulation III is structured for emission reduction purposes, and not for punitive or deterrent action. In addition, because of the availability of the Health and Safety Code, there is no need to establish a separate penalty system. Depending on the type of violation of rule provisions, the District could disallow the issuance of credits, void credits and/or impose penalties.

Comment #14-6 What is meant by "continuous operation?"

Response #14-6 MSERCs can only be issued if emission reduction are real and quantifiable and that means the low- or zero-emission vehicles must be put in actual operation to generate credits. Furthermore, vehicle operators are required to demonstrate or verify the continuous operation of the low-emission vehicles by annually submitting actual and projected VMT.

Comment #14-7 The District should issue MSERCs for heavy-duty engines based on emission standard increments of one-tenth, rather than the five-tenth step method. Allowing a smaller increment will encourage more clean fuel applications to come forward, and incentives will be greater for such conversions to take place.

Response #14-7 The ARB is responsible for specifying optional emission standards. They have indicated that the five-tenth increment will provide assurance that the engines are certified with a reasonable compliance margin to allow for test and production variations. Therefore, in conjunction with the ARB's guidelines, and in order to ensure that appropriate amounts of credits are issued, optional emission standards are considered at five-tenth (or 0.5 g/bhp-hr) increments.

Comment #14-8 Language should be added to the purpose (subdivision (a)) to emphasize the voluntary aspect of this rule, to ensure that vehicle conversions are not imposed by public agencies to meet CEQA or other similar environmental impact requirements.

Response #14-8 The District believes that the voluntary nature of proposed Rule 1612 is sufficiently communicated in subdivision (a), where it is stated that "these credits would be generated based on the operation of low- or zero-emission on-road vehicles, on a voluntary basis, that result in emission reductions beyond local, state and federal regulations."

Comment #15-1 The annual application process is too complicated to be an effective incentive for vehicle operators to participate in low-emission vehicle MSERC programs.

Response #15-1 The commentator is referred to the response to comment #6-1.

Comment #15-2 Proposed Rule 1612 should be modified to allow banking of emission reduction credits. This would provide maximum flexibility for potential users.

Response #15-2 The commentator is referred to the response to comment #3-5.

Comment #15-3 The MSERC discount factor should be reevaluated for ZEVs since there are no uncertainties with regard to emissions degradation of ZEVs.

Response #15-3 The commentator is referred to the response to comment #6-5.

Comment #15-4 We support the widest possible use of credits to lower the cost of reductions and maximize the use of air quality resources. As a result , we oppose limiting the use of MSERCs by precluding there use to offset emission increases caused by the removal of control equipment and use of non-compliant materials.

Response #15-4 Under the proposed rule, the District is also allowing MSERCs to be used for meeting the emission reduction requirements of RECLAIM as well as Regulation XI, XIII, and XV rules. However, staff does not believe that allowing offsets for processes or equipment that are already complying with District Regulation XI emission requirements by using control equipment or compliant materials, would be, in general, cost effective.

Comment #15-5 We believe that retroactive MSERCs should be issued for low-emission vehicles that have already been purchased, limited to vehicles purchased on or after 1990.

Response #15-5 The commentator is referred to the response to comment #3-6.

Comment #15-6 Why do diesel vehicles just receive NOx credits?

Response #15-6 The commentator is referred to the response to comment #7-7.

Comment #15-7 What is the useful life of a conversion kit?

Response #15-7 For the purposes of quantifying emission reductions and MSERCs, the useful life of a conversion kit will be equal to the original useful life of the vehicle/engine minus the odometer reading of the vehicle at the time of retrofit.

Comment #15-8 How will hybrid electric vehicles be handled?

Response #15-8 In terms of MSERC quantification, hybrid electric vehicles will be handled in the same manner as any other low-emission vehicles -- MSERC quantification will be based on the ARB certification standards and annual VMT generated by the vehicle, as well as clean fuel operation.

Comment #15-9 What does "certification emission standards" mean?

Response #15-9 Certification emission standard means the ARB adopted emission standards for exhaust, engine, and evaporative emissions (see Title 13, California Code of Regulations) that a manufacturer uses as part of the process to obtain approval from ARB to sell a vehicle/engine in California. The commentator is also referred to Section 39018 in the Health and Safety Code.

Comment #15-10 How will the definition of heavy-duty engine life work, how will it be enforced, and does it apply to zero-emission heavy-duty vehicles?

Response #15-10 Heavy-duty engine life refers to amount of miles during which an engine is expected to emit at or below its certification standard. It will be enforced by annual notifications of vehicle mileage as required by proposed Rule 1612. Heavy-duty engine life does not apply to ZEVs. The life of a ZEV starts when the vehicle is first placed in service for MSERC generation purposes, and ends when the vehicle is no longer being operated for MSERC generation purposes.

Comment #15-11 Will "extended engine life" apply to ZEVs?

Response #15-11 Extended engine life will not apply to ZEVs since the emissions from zero-emissions are not expected to deteriorate over mileage or time. Therefore, proposed Rule 1612 allows for the life of a ZEV to extend without mileage or time limitation, up until the vehicle is retired for MSERC generation purposes.

Comment #15-12 Are ZEVs included in the definition of repower and retrofits?

Response #15-12 ZEVs are defined as any vehicle which produces zero emissions of any criteria pollutants under any and all possible operational modes and conditions. ZEVs can originate as new vehicles or vehicles which have been modified to be ZEVs.

Comment #15-13 The definition of vehicle life for ZEVs shall be based on historical records. What does this mean?

Response #15-13 Proposed Rule 1612 has been revised such that the vehicle life of ZEVs will not be based on historical records. The vehicle life for a ZEV will be based on its actual operation, and extend until it is retired for MSERC generation purposes.

Comment #15-14 MSERC generation for SOx should be allowed.

Response #15-14 Proposed Rule 1612 has been revised to allow the generation of SOx MSERCs. Calculation of SOx will be based on District-wide average sulfur concentrations for the applicable fuels as well as fuel consumption.

Comment #15-15 Proposed Rule 1612 should allow inter-pollutant trading for NOx and VOCs, as well as SOx and NOx .

Response #15-15 The commentator is referred to the response to comment #6-4.

Comment #15-16 MSERC application to all Regulation XI rules should be allowed, not just the particular rules that allow them.

Response #15-16 Proposed Rule 1612 has been revised to allow Rule 1612 MSERCs to be used for compliance with any Regulation XI rule, provided that the rule has a future compliance date and that emission control equipment is not removed or noncompliant coatings are utilized. Allowing the use of MSERCs for all Regulation XI rules, regardless of whether they have future compliance dates or not, could result in the removal of add-on control equipment or the replacement of compliant with non-compliant materials, which is counterproductive to achieving air quality benefits. However, staff will continue to evaluate the use of MSERCs for additional Regulation XI rules.

Comment #15-17 MSERCs should apply to Regulation IV (Prohibitions).

Response #15-17 The commentator is referred to the response to comment #11-1.

Comment #15-18 Credit application deadlines should be extended beyond one month following the operation of low- or zero-emission vehicles.

Response #15-18 Proposed Rule 1612 has been revised to extend the deadline for submitting the MSERC Application from one month to 90 days.

Comment #15-19 MSERCs for light-duty vehicle tailpipe emissions other than NMOG should be allowed.

Response #15-19 The commentator is referred to the response to comment #10-1.

Comment #16-1 The issuance of VOC MSERCs for OEM alternative-fueled low-emission vehicles should be considered for evaporative emission reductions.

Response #16-1 The commentator is referred to the response to comment #10-1.

Comment #16-2 A vehicle operator should not be disqualified from participating in the program altogether, just because they did not apply within 30 days of vehicle operation.

Response #16-2 The rule language was revised to allow for a 90 day period, rather than a 30 day period, in order for an application to be submitted to the District.

Comment #16-3 The term of the MSERCs should be extended from one year to perhaps two or three years.

Response #16-3 The rule language was revised to allow for a two year term for MSERCs.

Comment #16-4 The vehicle operator should be able to bank MSERCs.

Response #16-4 The commentator is referred to the response to comment #3-5.

Comment #16-5 Diesel MSERCs should not be limited to NOx.

Response #16-5 The commentator is referred to the response to comment #7-7.

Comment #16-7 The 1.2 discount factor for alternative-fueled vehicles should not be utilized.

Response #16-7 The commentator is referred to the response to comment #6-5.

Comment #17-1 Optional emission standards need to be clarified since ARB does not use the term "optional emission standards" for retrofitted vehicles in Title 13, California Code of Regulations. The optional emission standards are actually in an ARB document entitled "California Certification and Installation Procedures for Alternative Fuel Retrofit Systems for Motor Vehicles Certified for 1994 and Subsequent Model Years (Retrofit Test Procedures)," dated May 1992.

Response #17-1 The optional emission standards as contained in the Retrofit Test Procedures are incorporated by reference in Title 13, California Code of Regulations and are therefore a part of these regulations. However, to address this potential ambiguity regarding the definition of optional emission standards, the definition for optional emission standard was revised; the definition now refers to the applicable vehicle or engine certification emission standards which are more stringent than the baseline emission standard, as specified by ARB's Mobile Source Credit Guidelines.

Comment #17-2 The rule is not clear as far as allowing credits for ZEV manufacturers that aren't complying with the ZEV mandate.

Response #17-2 Proposed Rule 1612 was revised to allow the generation of MSERCs for the operation of ZEVs provided that these vehicles are not being used for compliance with ARB NMOG fleet average emission standard requirements, as contained in the Low-Emission Vehicle regulation.

Comment #17-3 The equation used for calculating MSERCs for passenger cars, light-duty trucks, and medium-duty vehicles should be revised since it can only be applied when a vehicle is retrofitted into a low-emission configuration.

Response #17-3 The equation used to quantify MSERCs for passenger cars, light-duty trucks, and medium-duty vehicles can also apply when a new ZEV is purchased and operated, provided that this vehicle is not used for compliance with ARB's fleet average NMOG requirement as contained in their Low-Emission Vehicle regulations.

Comment #17-4 The proposed definition for ML should be changed to reflect fuel neutrality. ML should mean annual vehicle miles traveled in the South Coast Air Quality Management District while operating in the retrofitted mode, rather than operating on clean fuel.

Response #17-4 The definition for ML is already fuel neutral and therefore does not need modification, since clean fuel is defined as any fuel that was used to certify the vehicle or engine to an optional emission standard.

Comment #17-5 Proposed Rule 1612 should be revised to allow the generation of VOC MSERCs from evaporative emission reductions from vehicles with closed fueling systems.

Response #17-5 The commentator is referred to the response to comment #10-1.

Comment #17-6 The definition of ZEVs should be revised since it defines these vehicles that are powered solely by electricity, which are certified to an optional emission standard of zero grams per mile. This definition does not address other technologies such as fuel cells or fly wheels which may be able to meet the zero-emission vehicle standard.

Response #17-6 The commentator is referred to the response to comment #15-12.

Comment #18-1 EPA recommends adding an "Authority Citation" in the proposed rule.

Response #18-1 Most District rules do not have an authority secton, so for consistency, staff has not included one in the revised language.

Comment #18-2 The following additional terms should be defined in the rule: administering agency, decertification, emission related parts, low-emission vehicles, reporting and recordkeeping, and scheduled maintenance.

Response #18-2 The Proposed Rule 1612 definition section has been augmented and currently contains 21 defined terms, in response to input received at the public workshop, public consultation meeting, and written comments. Many of the additional definitions relate to the terms identified by the commentator. In addition, ARB has made recommendations regarding definitions and essentially all of these have been incorporated in the rule language. Therefore staff does not believe that additional revisions in the section are necessary to the section of Proposed Rule 1612 that contains defined terms.

Comment #18-3 Vehicle classification under baseline emission standards should be consistent with ARB's motor vehicle classifications. In addition, the definition of baseline emission must include all applicable federal requirements as well as ARB regulations.

Response #18-3 The proposed rule references ARB Emission Credit Guidelines in terms of vehicle classifications, and applicable mandatory requirements for vehicles. In addition, vehicle classifications affected by this proposed rule are thoroughly defined in the staff report and are equivalent with corresponding ARB definitions. Federal requirements are referenced in the Purpose section.

Comment #18-4 The clean fuel definition is confusing.

Response #18-4 The commentator is referred to the response to comment #4-2.

Comment #18-5 The proposed rule should require that dual-fuel or fuel-flexible vehicles be equipped with fuel counters or meters to verify the actual VMT that was generated using the clean fuel.

Response #18-5 It is not practical to require fuel meters on low-emission vehicles, since there is no vehicle manufacturer, that the District is aware of, that would install fuel meters in response to a voluntary District MSERC rule.

Comment #18-6 The definition of low-emission vehicles should be clarified.

Response #18-6 The commentator is referred to the response to comment #4-3.

Comment #18-7 The definition of retrofit/rebuild is weak. It should refer to the recondition/removal/replacement of one or more major cylinder heads.

Response #18-7 The commentator is referred to the response to comment #4-6.

Comment #18-8 The definition for vehicle operator/owner should include a minimum number of vehicles the entity must own. In addition, the definition is unclear whether the "vehicle operator" can simply just own or must they also operate vehicles in the District.

Response #18-8 The commentator is referred to the response to comment #12-5. Also Proposed Rule 1612 will not include a minimum number of vehicles the vehicle operator must own to qualify for MSERC generation, since the District is not aware of any justification supporting this requirement, and the commentator did not provide any justification.

Comment #18-9 The definition of zero-emission vehicle is unclear.

Response #18-9 The commentator is referred to the response to comment #4-8.

Comment #18-10 It is unclear what is meant by the operation of retrofitted passenger cars, light-duty trucks, medium-duty vehicles, and heavy-duty vehicles to enable compliance with optional emission standards.

Response #18-10 This statement simply means that these vehicles may be retrofitted (i.e., a hardware modification) to comply with optional emission standards. Optional emission standard is defined as the applicable optional vehicle or engine certification emission, as specified by ARB's Mobile Source Credit Guidelines, which are more stringent than the baseline emission standard.

Comment #18-11 The operation of ZEVs, in terms of a MSERC generation strategy, needs to be clarified.

Response #18-11 The commentator is referred to the response to comment #4-8.

Comment #18-12 Criteria for compliance in-use testing to guarantee credits are real during the credit life should be included in the rule language.

Response #18-12 The commentator is referred to the response to comment #4-10.

Comment #18-13 Language indicating that the "application shall be deemed approved" if the District does not take any action on the application within two months is not appropriate, since it may result in the issuance of unjustified MSERCs.

Response #18-13 The rule language was revised to incorporate this comment.

Comment #18-14 The proposed rule should include a statement that MSERCs may only be used for meeting RECLAIM, Regulation 1100 series rules, or Regulation XIII offset requirements, not control technology application requirements.

Response #18-14 The proposed rule does not allow MSERCs to be used to meet control technology application requirements. Basically, the rule language indicates that MSERCs can only be used as an alternative method of compliance with certain Regulation XI rules, Regulation XIII rules, Regulation XV rules, and any other District rules that allow the use of MSERCs. Also, MSERCs may also be used as RECLAIM trading credits. The commentator is also referred to response to comment #9-2.

Comment #18-15 The MSERC calculation is not clear. The approach used is reasonable provided that LEVs meet their projected emission standards in-use. However, if they don't meet their projected emissions standards in-use, this approach will over-estimate the emissions benefits. EPA is unsure what this means for heavy-duty vehicles.

Response #18-15 Proposed Rule 1612 was crafted not to allow the issuance of MSERCs unless low-emission vehicles are complying with applicable emission standards. If it is found that a vehicle is exceeding certification emission standards in-use, then the vehicle operator will be required to fix the vehicle. With regard to adjusting in-use emissions to some higher level if the vehicle does not meet certification emission levels, the District does not believe that this is appropriate since it is contrary to the ARB Mobile Source Credit Guidelines.

Comment #18-16 Actual VMT should be used instead of projected VMT for the purpose of quantifying MSERCs.

Response #18-16 The District believes that vehicle operators should be issued MSERCs as soon as possible, but at the same time, the rule should only issue MSERCs for real emission reductions. Since projected VMT will be "trued-up" in subsequent annual VMT reports to the District, there is very little risk that unjustified MSERCs will be issued.

Comment #18-17 Banking of credits is inconsistent with the goal of RECLAIM which is designed with no allowance for banking.

Response #18-17 Proposed Rule 1612 specifies a two year life for MSERCs issued for the operation of low-emission vehicles. The District does not believe that this provision will have any adverse effect on RECLAIM targets or ozone targets.

Comment #18-18 The use of the discount factor (DF) as presented in Proposed Rule 1612 is consistent with EPA guidance on the matter which states that DFs are used to account for emission estimation errors.

Response #18-18 The commentator is referred to the response to comment #6-5 and #9-2.

Comment #19-1 The 1.2 discount factor, used in the MSERC calculation methodology, is too large.

Response #19-1 The commentator is referred to the response to comment #6-5.

Comment #19-2 Banking of credits for a period of time beyond one year should be allowed.

Response #19-2 The commentator is referred to the response to comment #3-5.

Comment #19-3 There are discrepancies between PR 1612 and ARB proposed amendments with regard to the retrofit systems regulations. Specifically, Proposed Rule 1612 Regulations should take into account engines where no certification standard existed when the engine was sold.

Response #19-3 To address this issue, the baseline emission standard was revised to mean ceiling emission standards pursuant to ARB's Mobile Source Credit Guidelines, since this document defines the emission standards to be used in the situation where no certification standards existed when the engine was originally sold.

Comment #19-4 Emission reduction credits for carbon monoxide and hydrocarbon emission reductions should be available for strategies involving diesel applications.

Response #19-4 The commentator is referred to the response to comment #7-7.

Comment #19-5 The credit life should begin at the time the retrofit kit is installed rather than allowing six months to pass before the credits are issued.

Response #19-5 The commentator is referred to the response to comment #14-2.

Comment #20-1 The definition of optional emission standards needs to be clarified since ARB does not use the term "optional emission standards" for retrofitted vehicles in Title 13, California Code of Regulations. The optional emission standards are actually in an ARB document entitled "California Certification and Installation Procedures for Alternative Fuel Retrofit Systems for Motor Vehicles Certified for 1994 and Subsequent Model Years (Retrofit Test Procedures)," dated May 1992.

Response #20-1 The commentator is referred to the response to comment #17-1.

Comment #20-2 The rule is not clear as far as allowing credits for ZEV manufacturers that aren't complying with the ZEV mandate.

Response #20-2 The commentator is referred to the response to comment #17-2.

Comment #20-3 The equation used for calculating MSERCs for passenger cars, light-duty trucks, and medium-duty vehicles should be revised since it can only be applied when a vehicle is retrofitted into a low-emission configuration.

Response #20-3 The commentator is referred to the response to comment #17-3.

Comment #20-4 The proposed definition for ML should be changed to reflect fuel neutrality. ML should mean annual VMT in the South Coast Air Quality Management District while operating in the retrofitted mode, rather than operating on clean fuel.

Response #20-4 The commentator is referred to the response to comment #17-4.

Comment #20-5 Proposed Rule 1612 should be revised to allow the generation of VOC MSERCs from evaporative emission reductions from vehicles with closed fueling systems.

Response #20-5 The commentator is referred to the response to comment #10-1.

Comment #20-6 The definition of ZEVs should be revised since it defines those vehicles that are powered solely by electricity, which are certified to an optional emission standard of zero grams per mile. This definition does not address other technologies such as fuel cells or fly wheels which may be able to meet the zero-emission vehicle standard.

Response #20-6 The commentator is referred to the response to comment #15-12.

SUMMARY AND DRAFT FINDINGS

Summary

Proposed Rule 1612 which is part of the District's strategy to attain federal and state ambient air quality standards. Long-term air quality benefits are expected from attaining and maintaining the ambient air quality standards for ozone. Improved air quality will ultimately reduce negative public health impacts from this criteria pollutant.

Proposed Rule 1612 is technologically feasible and cost-effective, while reducing ROC, NOx, CO and PM, and the rule addresses concerns raised by the public, wherever possible. Therefore, staff recommends the adoption of Proposed Rule 1612.

These findings are being made in compliance with state law requirements.

DRAFT FINDINGS REQUIRED BY THE CALIFORNIA HEALTH AND SAFETY CODE

Health and Safety Code Section 40727 requires the District to adopt written findings of necessity, authority, clarity, consistency, non-duplication and reference.

Necessity - As set forth in the adopted Air Quality Management Plan (AQMP), the emission reductions associated with Proposed Rule 1612 are needed for the following reasons:

a) State and federal health-based ambient air quality standards for ozone are regularly and significantly violated in the South Coast Air Basin. The extensive reduction of ROC and NOx emissions (precursors to ozone formation) and CO, including the reductions from Proposed Rule 1612 is needed to meet federal and state air quality standards.

b) By exceeding state and federal air quality standards, the health of people within the South Coast Air Basin is impaired.

c) By exceeding state and federal air quality standards, the quality of life is reduced in the South Coast Air Basin in numerous respects.

d) The "California Clean Air Act" (CH&SC Section 40910 et seq.) requires that the District make every effort to attain federal and state ambient air quality standards as soon as practicable. Proposed Rule 1612 makes progress toward that goal.

e) The transportation standards in the California Clean Air Act require 1.5 or more persons per passenger vehicle by 1999 (or equivalent emissions reductions); no net increase in vehicle emissions after 1997; and must substantially reduce the rate of increase in passenger vehicle trips and vehicle miles traveled, Health & Safety Code Section 40919 (f) requires districts to endeavor to provide alternative emission reduction strategies toward reaching these goals.

Authority - The District Board obtains its authority to adopt, amend, or repeal rules and regulation from Health & Safety Code Sections 40000, 40001, 40440, 40441, 40463, 40702, 40725 through 40728, and 40910 through 40920.

Clarity - The District Board determines that Proposed Rule 1612 is written or displayed so that its meaning can be easily understood by persons directly affected by it.

Consistency - The District Board determines that Proposed Rule 1612 is in harmony with, and not in conflict with or contradictory to, existing federal or state statutes, court decisions, or regulations.

Non-Duplication - Proposed Rule 1612 does not impose the same requirements as any existing state of federal regulation and is necessary and proper to execute the powers and duties granted to, and imposed upon, the District.

Reference - In adopting this proposed rule, the Board references the following statutes which the District hereby implements, interprets or makes specific: H&S Code Sections 40001 (rules to achieve ambient air quality standards), 40440(a) (rules to carry out AQMP), 40920(c) (measures to achieve a 1.5 AVR during weekday commute hours by 1999 and no net increase in vehicle emissions after 1997), and 40919(f) (alternative emission reduction strategies to meet transportation performance standards).

REFERENCES

Acurex Environmental Corporation. Technical Feasibility of Reducing NOX and Particulate Emissions from Heavy-Duty Engines Final Report. April 1993

South Coast Air Quality Management District, Technology Advancement Office. A Status Report on Commercialization and Technology Transfer. January 1995.

California Air Resources Board (CARB). Guidelines for the Generation and Use of Mobile Source Emission Reduction Credits. February 1994.

U.S. Environmental Protection Agency. Guidance for the Implementation of Accelerated Retirement of Vehicles Programs. February 1993.

South Coast Air Quality Management District. Final 1994 Air Quality Management Plan. September 1994.

California Air Resources Board (CARB). Guidelines for New Heavy-Duty Vehicles to Generate Mobile Source Emission Reduction Credits -- Mail Out #93-55. December 1993.

California Air Resources Board (CARB) Section 1956.8, Title 13, California Code of Regulations. Exhaust Emission Standards and Test Procedures - 1985 and Subsequent Model Heavy-Duty Engines and Vehicles.

South Coast Air Quality Management District. Rule 1610 Old Vehicle Scrapping. February 1994.

South Coast Air Quality Management District. Review of Rule 1610. May 1995.

California Air Resources Board. 1994 Low-Emission Vehicle and Zero-Emission Vehicle Program Review. April 1994.

California Air Resources Board. The California State Implementation Plan for Ozone. November 1994.

California Air Resources Board. Staff Report for Proposed Amendments to Regulations Regarding California Exhaust Emission Standards and Test Procedures for 1985 and Subsequent Model Heavy-Duty Engines and Vehicles. May 1995.

ATTACHMENT C

PROPOSED RULE 1620 -
CREDITS FOR CLEAN OFF-ROAD MOBILE EQUIPMENT

July 25, 1995

(PR1620)

PROPOSED RULE 1620 CREDITS FOR CLEAN OFF-ROAD MOBILE EQUIPMENT

(a) Purpose

The purpose of this rule is to provide opportunities to generate NOx, VOC, CO, PM, and SOx mobile source emission reduction credits (MSERCs) that can be used as an alternative means of compliance with District regulations. These credits would be generated based on voluntary emission reductions created by the operation of low- or zero-emission off-road equipment within the jurisdiction of the District that result in emission reductions beyond those required by local, state, and federal regulations.

(b) Applicability

This voluntary rule becomes effective January 1, 1996 and applies to any off-road mobile equipment or vehicle for which emission standards have been adopted by the ARB or U.S. EPA and for which optional emission standards have been specified in the ARB's Mobile Source Credit Guidelines. The equipment and vehicles subject to this rule are used primarily off the highways to propel, move, or draw persons or property in construction, commercial, industrial, mining, agricultural, or forestry applications within the boundaries of the District and include equipment such as dozers, loaders, tractors, scrapers, graders, off-highway trucks, forklifts, and utility service vehicles. This rule does not apply to utility and lawn and garden equipment, off-road motorcycles, all-terrain vehicles, go-karts, golf carts, marine vessels, aircraft and locomotives. The ARB's Mobile Source Credit Guidelines refer to the version of the applicable guidelines which are in effect at the time of initial application for MSERCs.

(c) Definitions

For purposes of this rule, the following definitions shall apply:

(1) BASELINE EMISSION STANDARDS means the ceiling emission standards for off-road mobile equipment engines pursuant to the ARB's Mobile Source Credit Guidelines, or the actual emission level of the existing off-road mobile equipment as approved by the Executive Officer or designee. For utility service vehicles, baseline emission standard means the ARB's mandatory emission standards for new vehicle engines which are in effect at the time of initial application. For these engines, the baseline emission standards for VOC and NOx shall be based on the combined VOC+NOx emission standard prorated by certification emission values of each pollutant provided by ARB.

(2) CERTIFIED ENGINE means an ARB-certified engine or an off-road engine which has been upgraded to the configuration of an ARB-certified on-road engine in accordance with the ARB's Mobile Source Credit Guidelines.

(3) CERTIFIED CONVERSION KIT means any alternative fuel or add-on hardware conversion (retrofit) kit which has been certified by ARB to meet the optional emission standards in accordance with the ARB's Mobile Source Credit Guidelines.

(4) EQUIPMENT means any self-propelled off-road mobile equipment or vehicle which is targeted for repowering, retrofitting, or permanent replacement.

(5) EQUIPMENT OPERATOR means any entity who leases for at least one year or owns off-road mobile equipment, and controls the operation of off-road mobile equipment within the boundaries of the South Coast Air Quality Management District.

(6) LOAD FACTOR means the ratio of the engine power output during typical operating conditions to the engine rated horsepower.

(7) LOW-EMISSION EQUIPMENT means equipment utilizing ARB-certified engines or conversion kits, or which has been retrofitted to meet one of the optional emission standards.

(8) MAJOR ENGINE OVERHAUL means a complete rebuilding of a low-emission equipment engine such that the engine is returned to a condition that is equivalent in operation, durability, and emissions performance to the originally certified engine or conversion kit, by cleaning, adjustment, repair, and major component replacement of the engine which are considered to be beyond routine maintenance procedures.

(9) MOBILE SOURCE EMISSION REDUCTION CREDIT (MSERC) means real, quantified emission reductions in accordance with the ARB's Mobile Source Credit Guidelines, approved by the Executive Officer or designee, that can be used to comply with District Regulations pursuant to subdivision (g), and are surplus to emission reductions required by U.S. EPA, ARB or District regulations.

(10) NITROGEN OXIDES (NOx) means the sum of nitric oxides and nitrogen dioxides emitted, calculated as nitrogen dioxide.

(11) NON-POLLUTING ALTERNATIVES means methods or processes which are used to replace existing off-road equipment and do not directly generate any air pollution.

(12) OPTIONAL EMISSION STANDARDS means the applicable equipment engine emission standards, as specified by the ARB's Mobile Source Credit Guidelines, which are more stringent than the baseline emission standard. Zero-emission equipment and non-polluting alternatives shall be assigned an optional emission standard of zero grams per brake horsepower-hour.

(13) PERMANENT REPLACEMENT means to permanently remove existing off-road equipment which has been in continuous active operation from service, such that the equipment will not be operated within the District, and to replace it with non-polluting alternatives. Equipment which is scrapped, or permanently relocated or sold outside the District, and is demonstrated not to be brought back or sold back into the District, will be considered to be permanently removed.

(14) REPOWER means to replace the existing off-road equipment engine with a certified engine to meet one of the optional emission standards.

(15) RETROFIT means to modify the existing off-road equipment engine with a certified conversion kit to meet one of the optional emission standards. Retrofit also means to modify the existing off-road equipment with on-road emission control technologies, tested in accordance with the ARB's test procedures for off-road equipment engines specified in Title 13, California Code of Regulations, to meet one of the optional emission standards.

(16) USEFUL LIFE means the life (in hours) that the equipment retrofitted with alternative fuel conversion kits is expected to meet one of the optional emission standards and is equivalent to the durability period of the certified conversion kit.

(17) VOLATILE ORGANIC COMPOUND (VOC) is any volatile compound of carbon; excluding methane, carbon monoxide, carbon dioxide, carbonic acid, metallic carbides or carbonates; ammonium carbonate, and exempt compounds as defined in District Rule 102.

(18) ZERO-EMISSION EQUIPMENT means any equipment which produces zero emissions of any criteria pollutants under any and all possible operational modes and conditions.

(d) Equipment Operator Requirements

In order to generate MSERCs, an equipment operator shall:

(1) implement one or more of the following projects: purchase new low- or zero-emission equipment; or repower, retrofit, or permanently replace existing equipment to meet one of the optional emission standards. Equipment operators who operate equipment without utilizing certified engines or conversion kits shall demonstrate, according to ARB's certification test methods, and as approved by the Executive Officer or designee, that the emission levels of the equipment correspond to one or more of the applicable optional emission standards.

(2) for projects involving permanent replacement,

(A) submit an Off-Road MSERC Application, as specified in subdivision (e), within 90 days of the completion of any permanent replacement which occurs after rule effective date. For projects involving permanent replacement completed prior to rule effective date, the equipment operator shall submit an Off-Road MSERC Application, as specified in subdivision (e), within one year of the rule effective date.

(B) annually renew the MSERCs by notifying the Executive Officer or designee in writing of the continued operation of the non-polluting alternative one year following the approval of the Off-Road MSERC Application and every year thereafter.

(3) for projects not involving permanent replacement,

(A) submit an Off-Road MSERC Application, as specified in subdivision (e), within 90 days subsequent to the initial service date of the low- or zero-emission equipment, for projects involving purchasing, repowering, or retrofitting after rule effective date.

(B) submit an Off-Road MSERC Application, as specified in subdivision (e), within one year subsequent to rule effective date, for projects involving purchasing prior to rule effective date.

(C) following approval of the Off-Road MSERC Application, demonstrate the operation of the low- or zero-emission equipment to the satisfaction of the Executive Officer or designee by submitting the actual operating hours for the six-month period from the initial service date, and the projected operating hours for the subsequent six-month period.

(D) annually renew the MSERCs by submitting the actual operating hours for each preceding twelve-month period and the projected operating hours for each subsequent six-month period.

(E) verify that the operation of new, repowered, or retrofitted equipment shall not increase emissions of other pollutants, including VOC, CO, PM, and smoke beyond the standards specified in Title 13, California Code of Regulations.

(4) notify the Executive Officer or designee in writing within 90 days following retirement of the low- or zero-emission equipment or the non-polluting alternative or removal of the equipment from service for an engine replacement or a major engine overhaul. The equipment operator shall ensure that engine replacements and major engine overhauls are performed in accordance with specifications and procedures required by the engine and/or conversion kit manufacturer(s). The equipment operator shall also be responsible for maintaining the engines or conversion kits, meeting optional emission standards, within manufacturer(s)' specifications throughout the credit life.

(5) use only manufacturer approved facilities for the installation of certified conversion kits ("Manufacturer" refers to the certified conversion kit manufacturer).

(6) in lieu of using baseline emission standards specified in the ARB's Mobile Source Credit Guidelines, submit emissions test data in accordance with ARB's applicable test procedures and protocols to demonstrate the actual emission level of the existing equipment, subject to the approval of the Executive Officer or designee.

(e) Off-Road MSERC Application

(1) In order to obtain MSERCs, an equipment operator shall submit an Off-Road MSERC Application. The purpose of the Application is to document the purchase, retrofit, repowering or permanent replacement project as well as the operation of the low- or zero-emission equipment or the non-polluting alternative following the initial service date. The Off-Road MSERC Application shall contain specific information including, but not limited to:

(A) a description of the repowering, retrofitting, purchasing or permanent replacement project, including at minimum the equipment type, equipment and engine manufacturer, equipment and engine model, engine model year, equipment identification number, or any non-polluting alternative methods or processes which will be used;

(B) proof of purchase or lease of the low- or zero-emission equipment or non-polluting alternative, and proof of purchase for certified engines and conversion kits;

(C) the initial service date of each low- or zero-emission equipment or the non-polluting alternative;

(D) for projects involving permanent replacement, historical records of annual operating hours and fuel consumption for the existing equipment which is permanently replaced, and proof of permanent replacement to the satisfaction of the Executive Officer or designee;

(E) load factor for each low-emission equipment supported by actual fuel consumption data;

(F) emission testing results for existing off-road equipment which has been retrofitted with non-certified conversion kits;

(G) emission test results for existing off-road mobile equipment from equipment operators seeking to establish baseline emission standard based on actual emission levels;

(H) written statement from the equipment operator to verify that the repowering, retrofitting, or upgrading of existing off-road equipment engine was conducted in accordance with engine or conversion kit manufacturer's specifications and procedures;

(I) identification of the legal owner of the MSERCs to be issued by the Executive Officer or designee; and

(J) intended use of MSERCs pursuant to subdivision (h), if known.

(2) The Executive Officer or designee shall approve or disapprove the Off-Road MSERC Application in writing.

(f) Issuance of MSERCs

(1) For projects not involving permanent replacement, MSERCs shall be issued after approval of the Off-Road MSERC Application by the Executive Officer or designee and upon submittal and verification by the Executive Officer or designee of the actual and projected operating hours for each low- or zero-emission equipment as specified in paragraph (d)(3) and in accordance with the MSERC calculation methodology specified in subdivision (g). For projects involving purchasing prior to rule effective date, MSERCs shall be issued based only on the operation of the low- or zero-emission equipment which occurs following the submittal of the Off-Road MSERC Application.

(2) For projects involving permanent replacement, MSERCs shall be issued upon approval of the Off-Road MSERC Application by the Executive Officer or designee and submittal and verification by the Executive Officer or designee of the annual written notifications of the continued operation of the non-polluting alternative as specified in paragraph (d)(2) and in accordance with the MSERC calculation methodology specified in subdivision (g). For projects involving permanent replacement prior to rule effective date, MSERCs shall be issued based only on the operation of the non-polluting alternative which occurs following the submittal of the Off-Road MSERC Application.

(3) For all projects, MSERCs shall be issued by the Executive Officer or designee:

(A) for NOx, VOC, CO, and PM, in accordance with paragraph (g)(1), if mandatory emission standards have been adopted by the ARB or U.S. EPA, and optional emission standards have been specified in the ARB's Mobile Source Credit Guidelines, or if compliance with applicable optional emission standards can be demonstrated, according to ARB's certification test methods, as approved by the Executive Officer or designee; and

(B) for SOx, in accordance with the MSERC calculation methodology specified in paragraph (g)(2); and

(4) For all projects, MSERCs shall be issued by the Executive Officer or designee based on continued demonstration of the actual operation of each low- or zero-emission equipment or non-polluting alternative. This demonstration shall start when the equipment or non-polluting alternative is first placed into service, but shall end when the equipment or non-polluting alternative is retired or removed from service for an engine replacement. However, for projects involving purchasing or permanent replacement prior to rule effective date, this demonstration shall start when the Off-Road MSERC Application is submitted. For equipment retrofitted with alternative fuel conversion kits, MSERCs shall end when the useful life of the kit expires.

(g) MSERC Calculation

(1) The total amount of NOx, VOC, CO, and PM MSERCs generated when an equipment is permanently replaced, repowered, retrofitted, or when a new low- or zero-emission equipment is purchased shall be calculated by the Executive Officer or designee for each year according to the following formula:

MSERC = [(Sbase - Sopt) x (HRS x HP x LF)]/(454 x DF)

where:

MSERC = Mobile source emission reduction credits per unit (pounds per year)

Sbase = Baseline emission standards (grams/bhp-hr)

Sopt = Optional emission standards (grams/bhp-hr) for repowered, retrofitted, or new equipment engine

HRS = Annual hours of operation, as specified in paragraph (g)(2)

HP = Rated horsepower (hp)

LF = Load factor

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and REG XI rules

Equipment operators should contact the District or ARB to confirm the applicable baseline and optional emission standards before submitting the Off-Road MSERC Application.

(2) MSERCs issued for SOx emission reductions shall be calculated by the Executive Officer or designee according to the following formula:

MSERC = 2 x ((Fbase x Sbase) - (Fopt x Sopt))/DF

where

MSERC = Mobile source emission reduction credits (pounds per year)

Fbase = amount of fuel used to power equipment targeted for repowering, retrofitting, or permanent replacement (gallons or standard cubic feet per year)

Sbase = sulfur concentration in fuel used to power equipment targeted for repowering, retrofitting, or permanent replacement (pounds per gallon or pounds per standard cubic foot)

Fopt = amount of fuel used to power low-emission equipment (gallons or standard cubic feet per year)

Sopt = sulfur concentration in fuel used to power low-emission equipment (pounds per gallon or pounds per standard cubic foot)

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and REG XI rules

Sbase and Sopt shall be obtained from the Executive Officer or Designee and shall be representative of average sulfur concentrations for applicable fuels used within the boundaries of the District. Fbase and Fopt shall be submitted by the equipment operator at the same time that annual operating hours are submitted to the Executive Officer or designee pursuant to paragraphs (d)(2) or (d)(3).

(3) For projects not involving permanent replacement,

(A) the MSERCs for the first year after initial service date shall be calculated by the Executive Officer or designee based on the actual operating hours for the six-month period following the initial service date and the projected operating hours for the subsequent six-month period. For projects involving purchasing prior to rule effective date, the initial service date shall be the submittal date of the Off-Road MSERC Application.

(B) For all subsequent years, the MSERCs shall be based on the actual operating hours for each preceding twelve-month period and the projected operating hours for each subsequent six-month period. The projected operating hours shall not be 50% greater than the actual operating hours for the previous six-month period unless the equipment operator can demonstrate to the satisfaction of the Executive Officer or designee that the projected operating hours shall occur.

(C) The MSERCs shall be adjusted every year to reflect any difference between the projected operating hours reported in the previous year and the actual operating hours for the same period.

(4) For projects involving permanent replacement, MSERCs shall be calculated by the Executive Officer or designee based on historical records of operating hours of the replaced equipment. For the first year, MSERCs shall be issued upon approval of the Off-Road MSERC Application. For all subsequent years, MSERCs shall be issued upon submittal of written notification of the continued operation of the non-polluting alternative. For projects involving permanent replacement prior to rule effective date, the initial service date shall be the submittal date of the Off-Road MSERC Application.

(5) MSERCs shall expire two years after the date of issuance.

(h) Use of MSERCs

(1) MSERCs may be used for any of the following applications:

(A) As RECLAIM Trading Credits. The Executive Officer or designee shall convert MSERCs to RTCs upon submission of MSERCs by user.

(B) As an alternative method of compliance with District Regulation XI rules that have future compliance dates. MSERCs shall not be used to offset emission increases caused by the removal of emission control equipment or replacement of compliant with noncompliant materials subject to Regulation XI. MSERCs must be in existence and designated as an alternative method of compliance in advance of the compliance date.

(C) As an alternative method of compliance with District Regulation XV rules that allow the use of MSERCs in accordance with Regulation XV.

(D) As New Source Review (NSR) offsets for emission increases at new or modified facilities that are subject to Rule 1303 (b)(2) in accordance with the provisions of Regulation XIII. Pursuant to Rule 504, no variance or series of variances, including emergency and interim variances, shall be granted for a period in excess of 90 days from the initial granting of a variance, from a permit condition implementing a Regulation XIII offset requirements if such permit condition is based upon the use of MSERCs.

(E) For voluntary retirement of MSERCs for air quality benefits.

(F) As an alternative method of compliance with any District regulations which specifically authorize the use of MSERCs.

(2) MSERCs shall only be consumed in the air basin where the equipment operator is based.

(3) In order to use MSERCs for the applications listed in subparagraph (1)(B) of this subdivision, the user shall submit a compliance plan to the Executive Officer or designee. The purpose of the compliance plan is to demonstrate compliance with rule requirements, and shall specify the use of MSERCs.

(4) The compliance plan shall contain the following information:

(A) Total MSERCs (attach certificates)

(B) Identification of the specific rule for which the alternative method of compliance is sought;

(C) The period of time for the alternative method of compliance;

(D) Number of MSERCs used to substantiate the alternative method of compliance;

(E) A quantification of emissions that would result from noncompliance with the rule identified in subparagraph (h)(4)(B), and documentation supporting the emissions quantification.

(5) Supporting documentation (applicable for MSERC usage for Regulation XI rules) shall include, but is not limited to:

(A) a listing of equipment and materials that are the source of noncompliant VOC, NOx, CO, PM, or SOx emissions associated with the rule identified in subparagraph (h)(4)(B).

(B) a description and operating conditions of equipment listed in subparagraph (h)(5)(A) and/or composition and rate of use of materials listed in subparagraph (h)(5)(A).

(C) emission rates associated with the use of equipment and/or materials listed in subparagraph (h)(5)(A).

(D) a listing of equipment and/or materials that would result in compliance with the rule identified in subparagraph (h)(4)(B).

(E) a description and operating conditions of equipment listed in subparagraph (h)(5)(D) and/or composition and rate of use or materials listed in subparagraph (h)(5)(D).

(F) emission rates associated with the use of equipment and/or materials listed in subparagraph (h)(5)(D).

(6) The compliance plan shall be written on a form to be specified by the Executive Officer or designee.

(7) The Executive Officer or designee shall approve or disapprove the compliance plan. The plan shall be disapproved unless it demonstrates that an equivalent amount of emissions reductions are obtained through the alternative method of compliance.

(8) MSERCs may not be used as an alternative method of compliance with Regulation XI rules until the Executive Officer or designee has approved the compliance plan.

(9) The user must renew the compliance plan prior to the expiration of MSERCs upon which the plan is based.

(i) Recordkeeping Requirements

(1) Equipment operators shall be responsible for storing and maintaining data records for each low- or zero-emission equipment which generates MSERCs. The data records shall contain operating data (monthly hour-meter logs obtained from non-resettable hour-meters), fuel consumption data (monthly fuel usage logs), maintenance and repair records, and any other necessary data.

(2) Equipment operators shall maintain a copy of data records described in paragraph (i)(1) for the two most recent years of operation for each low- or zero-emission equipment which generates MSERCs.

(j) Compliance Auditing and Enforcement

(1) The Executive Officer or designee shall be afforded access in the District to audit any files and/or records created to comply with recordkeeping requirements, specified in subdivision (i), or require equipment operators to submit such records to the Executive Officer or designee upon request.

(2) The Executive Officer or designee shall be afforded access upon request to inspect the low- or zero-emission equipment, or non-polluting alternative at equipment operators' facilities. The Executive Officer or designee may require emissions testing at a designated emission test facility at the District's expense, to determine compliance with Rule 1620 requirements for the generation of MSERCs.

(3) Violation of any provision of this rule, including falsification of information in the Off-Road MSERC Application or annual operating data shall be grounds for the Executive Officer to disallow or void any MSERCs resulting from or associated with the violation, by disapproving or seeking revocation of the Off-Road MSERC Application or annual data submission, and shall be subject to the penalties specified in the Health and Safety Code for violation of District rules.

(k) Requirements for Public Notice

Following a completeness determination of the Off-Road MSERC Application for the use of MSERCs as NSR offsets only, as provided in subparagraph (h)(1)(D), the Executive Officer or designee shall:

(1) perform the evaluations required to determine compliance with this regulation and make a preliminary written decision, as appropriate, as to whether or not MSERCs, to be used as emission reduction credits (ERCs), should be approved or disapproved. The decision shall be supported by a succinct written analysis; and

(2) publish a notice by prominent advertisement in at least one newspaper of general circulation in the District stating the preliminary decision of the Executive Officer or designee and where the public may inspect the information. The notice shall provide 30 days from the date of publication for the public to submit written comments on the preliminary decision; and

(3) at the time notice of the preliminary decision is published, make available for public inspection at the District office the information submitted by the applicant, the supporting analysis for the preliminary decision, and the preliminary decision to grant or deny MSERCs and the reasons therefore. The confidentiality of trade secrets shall be considered in accordance with Section 6254.7 of the Government Code.

(l) Appeal of Disapproval of MSERC Issuance

An applicant may, within 30 days of receipt of notice of disapproval, request the hearing board to hold a hearing on whether the Off-Road MSERC Application was properly refused.

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

Draft Staff Report
Proposed Rule 1620 - Credits for Clean Off-Road Mobile Equipment

July 1995

Deputy Executive Officer

Planning, Transportation and Information Management

Barry R. Wallerstein, D. Env.

Director

Planning and Policy

Jack P. Broadbent

Manager

Planning and Policy

Henry Hogo

AUTHORS:

Planning and Policy

Zorik Pirveysian - Program Supervisor

Edward Eckerle - A.Q. Specialist

Reviewed by:

Frances Keeler - Deputy District Counsel

Carol Engelhardt - Deputy District Prosecutor

INTRODUCTION 1

BACKGROUND 1

Regulatory History 4

Technological Feasibility 7

SUMMARY OF RULE REQUIREMENTS 10

PUBLIC COMMENTS 30

SUMMARY AND DRAFT FINDINGS 64

POTENTIAL EMISSIONS IMPACTS 21

COST-EFFECTIVENESS 23

PUBLIC COMMENTS 25

SUMMARY AND DRAFT FINDINGS 60

REFERENCES 62

SOUTH COAST AIR QUALITY MANAGEMENT DISTRICT

MOBILE SOURCE REGULATIONS

PRELIMINARY DRAFT STAFF REPORT

PROPOSED RULE 1620

CREDITS FOR CLEAN OFF-ROAD EQUIPMENT

July 19, 1995

Prepared by: Zorik Pirveysian - Program Supervisor

Edward Eckerle - Air Quality Specialist

Reviewed by: Henry Hogo - Planning Manager

INTRODUCTION

Mobile source emission reduction credit (MSERC) programs for off-road mobile equipment and vehicles are currently being developed by the South Coast Air Quality Management District (District) in order to reduce emissions and provide stationary source operators an alternative method of compliance with District regulations. The impetus for developing these programs has primarily been the interest expressed by stationary source facility operators, during the RECLAIM rule development process, to use the emission reductions generated from their on-site off-road vehicles and mobile equipment to meet the RECLAIM emission reduction requirements. As a result, the District committed to develop an off-road mobile source credit program to offer industry additional flexibility to meet RECLAIM and other District emission reduction requirements.

Despite existing regulations for off-road mobile equipment and vehicles by the California Air Resources Board (ARB) and the U.S. Environmental Protection Agency (U.S. EPA), opportunities still exist to achieve additional emission reductions from these sources through MSERC programs. Proposed Rule 1620 - Credits for Clean Off-Road Mobile Equipment is the first such off-road MSERC program to be considered for adoption. Under the proposed rule, the District will issue NOx, VOC, CO, PM, and SOx MSERCs to off-road mobile equipment operators who voluntarily purchase new low- or zero-emission equipment; or repower, retrofit, or permanently replace their existing equipment to meet low-emission targets. In order to qualify for credits, the emission reductions generated from these equipment must be real, quantifiable, enforceable, and go beyond District, ARB, and U.S. EPA regulations.

BACKGROUND

Off-road mobile equipment and vehicles refer to a wide variety of mobile source categories such as aircraft, trains, marine vessels, farm and construction equipment (e.g., bulldozers), industrial equipment (e.g., forklifts), and utility and lawn and garden equipment (e.g., lawn mowers). Because of the broad range of applications, off-road vehicles and equipment are powered by varying designs and sizes of gasoline, diesel and jet engines. For the most part, these emission sources are virtually uncontrolled and have only recently been the subject of state and federal emission regulations.

Off-road mobile equipment subject to the proposed rule include equipment and vehicles used primarily off the highways to move, propel, or draw persons or property in construction, commercial, industrial, mining, forestry, or agricultural applications. These equipment come in a variety of types and sizes covering a wide range of applications. Typically, they are used in multiple applications (e.g., loaders used in construction and mining operations), but there are also many types of specialized equipment that have single-purpose applications (e.g., concrete pavers used in construction).

For the purpose of credit generation, the proposed rule applies to off-road mobile equipment and vehicle categories for which emission standards have been adopted by the ARB or U.S. EPA, and optional emission standards have been specified for these equipment in the ARB's credit guidelines. At this time, the proposed rule will apply to off-road diesel cycle equipment (>50 hp) and specialty vehicles (i.e., utility service vehicles) because of existing ARB and U.S. EPA regulations as well as the ARB's credit guidelines for off-road diesel cycle engines. Non-diesel powered off-road equipment (e.g., gasoline and LPG-powered engines >25 hp) will be subject to the proposed credit rule once mandatory emission standards are adopted and optional emission standards have been specified by the ARB or U.S. EPA. Other off-road categories such as utility and lawn and garden equipment, marine vessels, aircraft, locomotives, off-road motorcycles, all-terrain vehicles, go-karts, and golf carts are excluded from the proposed rule. Table I lists some of the most common types of equipment subject to the proposed rule.

Table I
Off-Road Equipment and Vehicle Types
Subject to Proposed Rule 1620

Backhoe Loader
Off-Highway Truck Dozer
Roller/Compactor Dumper
Utility Service Vehicle Excavator
Scraper Grader
Forklift Crane
Concrete Paver Tractor

The proposed rule will provide a mechanism for issuing NOx, VOC, CO, PM, and SOx MSERCs for emission reductions achieved significantly beyond the standards mandated by ARB or U.S. EPA. In order to generate MSERCs, each new, repowered or retrofitted low- or zero-emission equipment must meet one of the optional emission standards specified by the ARB in their mobile source credit guidelines (CARB, 1995). These guidelines are expected to be adopted by the ARB later this year. In addition, operators who permanently replace their existing off-road mobile equipment with non-polluting alternatives (e.g., electric conveyor systems) can also generate credits under the proposed rule. For projects involving utility service vehicles or projects involving permanent replacement of existing equipment with non-polluting alternatives, battery-powered units or electrically-operated systems would automatically qualify as being certified to an optional emission standard of zero grams per brake horsepower hour (g/bhp-hr).

Based on the 1990 emissions inventory, off-road equipment subject to the proposed rule (i.e., diesel cycle engines at or above 50 hp and utility service vehicles) contribute approximately 185 tons per day of NOx, 19 tons per day of VOC, and 76 tons per day of CO emissions in the South Coast Air Basin (SCAQMD, 1994). Figure I compares the NOx and VOC emissions from these equipment to all off-road mobile sources and to the overall basin-wide inventory.

Regulatory History

Until recently, off-road mobile equipment and vehicles, which fall under state and federal jurisdictions, had not been regulated by the U.S. EPA or ARB. Under the California Clean Air Act (CCAA), ARB is required to consider the adoption of emission control regulations for off-road equipment. The CCAA also requires ARB to consider regulating emissions from off-road engines in order to help achieve a five percent per year reduction of carbon monoxide and ozone precursor emissions. Accordingly, in order to satisfy the CCAA mandates, ARB adopted emission standards for heavy-duty off-road diesel cycle equipment engines, utility and lawn and garden equipment engines (not subject to Proposed Rule 1620), and off-highway motorcycles and recreational vehicles. The emission standards for heavy-duty off-road diesel cycle equipment were adopted in 1992 and affect new 1996 and later model year equipment engines. ARB chose to apply these standards to engines at or above 175 hp since California is preempted from regulating new engines below 175 hp that power farm and construction equipment but EPA has not yet defined what this constitutes. ARB has established a NOx standard of 6.9 grams per brake horsepower-hour (g/bhp-hr) for engines between 175 and 750 hp which are manufactured between 1996 and 2000. The NOx standard reduces to 5.8 g/bhp-hr for 2001 and later model year engines. For engines greater than 750 hp, the NOx standard of 6.9 g/bhp-hr goes into effect in 2000.

In 1994, ARB adopted emission standards for new off-highway motorcycles and recreational vehicles. Specialty vehicles (i.e., utility service vehicles) are the only category of off-road motorcycle and recreational vehicles which are subject to Proposed Rule 1620 because battery-powered versions of these vehicles are commercially available. The emission standards for utility service vehicles call for a combined hydrocarbon (HC) and NOx limit of 10.0 or 12.0 g/bhp-hr (depending on engine displacement) for engines less than 25 hp and manufactured between 1995 and 1998. In 1999, the standard reduces to 3.2 g/bhp-hr for these engines, regardless of the displacement. The combined NOx and HC emission standard for utility service vehicle engines at and above 25 hp and manufactured after 1996 is 3.2 g/bhp-hr. Table II presents California and federal emission standards for the categories of off-road equipment engines subject to Proposed Rule 1620.

Table II
California and Federal
Exhaust Emission Standards
(g/bhp-hr)

Hydro- Oxides of Carbon
Model Year Carbon Nitrogen Monoxide Particulate

Heavy-Duty Diesel

1996 to 2000 1.0 6.9 8.5 0.4
(175 to 750 hp)

2001 and Subsequent 1.0 5.8 8.5 0.16
(175 to 750 hp)

2000 and Subsequent 1.0 6.9 8.5 0.4
(>750 hp)

Diesel (50 to 175 hp)
1997 and Subsequent --- 6.9 --- ---
(50 to <100 hp)

1998 and Subsequent --- 6.9 --- ---
(100 to <175 hp)

Specialty Vehicles
1995 to 1998
(<25 hp and >225cc) 10.0 combined 300 0.9

(<25 hp and <225cc) 12.0 combined 300 0.9

1999 and Subsequent 3.2 combined 100 0.25
(<25 hp)

1997 and Subsequent 3.2 combined 100 0.25
(>25 hp)

ARB has not yet developed emission standards for light-duty off-road equipment utilizing spark-ignited engines rated at 25 horsepower and greater and diesel engines between 25 and 175 horsepower.

A 2.5 g/bhp-hr NOx standard for new 2005 and later model year off-road diesel engines (>25 hp) is also contained as part of the mobile source element of the 1994 California State Implementation Plan (SIP). For gasoline and LPG equipment engines, the 1994 SIP contains a measure to develop California and national regulations capable of achieving a 50 percent reduction in NOx and a 75 percent reduction in VOC emissions by 2010. These standards are expected to be adopted in 1997 and go into effect in 2000. Both U.S. EPA and ARB are identified as the primary responsible agencies for these regulations.

The Federal Clean Air Act (CAA) requires the U.S. EPA to study the emissions from off-road sources and promulgate regulations controlling those emissions if they were found to significantly contribute to ozone or carbon monoxide concentrations in more than one non-attainment area of the nation. The study was completed in 1991 and revealed that nonroad engines are significant contributors to ozone and CO emissions. Subsequently, in May 1994, U.S. EPA adopted regulations which establish national emission standards for new off-road diesel engines greater than 50 HP. The federal NOx emission standard of 6.9 g/bhp-hr would go into effect in 1996 for engines greater than or equal to 175 hp but less than or equal to 750 hp, similar to California emission standards. The standard would be phased in during subsequent years for engines less than 175 hp and greater than 750 hp.

The CAA also encourages market-based approaches to facilitate the attainment and maintenance of the National Ambient Air Quality Standards (NAAQS). In particular, for areas which face relatively high stationary source control costs relative to mobile source control costs, there may be significant benefits to creating market-based programs which specifically allow for the trading of emission reduction credits from off-road mobile sources to stationary sources. Accordingly, the U.S. EPA has published interim guidelines on the generation of MSERCs. Similarly, ARB has published a guidance document to assist the local air districts in designing on-road vehicle MSERC programs (CARB, 1994). Under these guidelines, in order to qualify for credits, emission reductions must be real and quantifiable to an acceptable degree of certainty. In addition, the actions that produce the credits should be enforceable and legally binding, and the life of the reductions must be reasonably established and commensurate with the proposed use of the credits. Specifically, these programs include: accelerated retirement of older vehicles; purchase of low-emission buses; purchase of zero-emission vehicles; and retrofitting passenger cars, light-duty trucks, and medium and heavy-duty vehicles to low-emission configurations. The guidance document provides guidelines on how MSERCs can be generated, identifies possible uses of credits, and specifies criteria which must be met for reductions to qualify as credits.

The ARB recently held a public workshop to discuss draft guidelines for generating MSERCs through the conversion of off-road diesel cycle engines at or above 50 horsepower to low-emission configurations (CARB, 1995). Although the ARB may not adopt optional emission standards for off-road diesel cycle engines in a regulatory form, the guidelines would specify the applicable optional emission standards which would qualify for credits. The ARB is expected to finalize and adopt the proposed guidelines later this year.

District Rule 1610 - Old Vehicle Scrapping, adopted in January 1993, was the first comprehensive MSERC program implemented in the South Coast Air Basin. This rule establishes a mechanism for the generation of VOC and NOx MSERCs when pre-1982 model year passenger cars and light-duty trucks are scrapped. MSERCs generated by this scrapping program can be used to comply with future requirements of designated rules under Regulation XI. In addition, under the Regional Clean Air Incentives Market (RECLAIM) program (Regulation XX), facilities could also obtain RECLAIM Trading Credits (RTCs) by the generation or acquisition of these MSERCs. Proposed Rule 1612 - Credits for Clean On-Road Vehicles is also being developed to consider issuing MSERCs for voluntarily purchasing and/or operating new low- or zero- emission on-road vehicles. Off-Road equipment categories not covered under the proposed rule will be evaluated for possible future credit programs.

Technological Feasibility

Much of the equipment subject to Proposed Rule 1620 is powered by off-road diesel cycle engines. Existing off-road diesel engine technology features equipment which is either naturally aspirated, turbocharged, or turbocharged with aftercooler. Unlike naturally aspirated engines, turbocharged engines increase the amount of air retained in the cylinder by adding a pump or compressor. Turbochargers result in higher combustion efficiencies and leaner fuel mixtures, thereby resulting in lower PM, CO, and HC emission levels, but have little effect on NOx emissions. Some heavy-duty off-road vehicles are equipped with jacket water aftercoolers primarily to achieve higher power output. Aftercoolers remove heat from the intake air by cooling the air charge supplied by the turbocharger before entering the intake manifold. The effect is to further increase the mass flow of air by making the air more dense. As a secondary effect, NOx emissions are reduced due to the lower combustion temperatures.

Off-road diesel engine technologies capable of meeting California or federal NOx emission standards of 6.9 g/bhp-hr and 5.8 g/bhp-hr currently exist and are primarily based on on-road emission control technologies such as injection timing retard, increases in injection pressures, combustion chamber optimization, and charge air cooling in combination with turbocharging.

Injection timing retard reduces NOx emissions by allowing the combustion to occur at or after top dead center, reducing the fuel residence time in the cylinder, thereby causing lower combustion temperatures. A drawback associated with timing retard is increased fuel consumption; this can be partially offset by increasing fuel injection pressures, which improves fuel atomization, resulting in more complete combustion. Combustion chamber modifications can improve combustion and lower peak combustion temperatures so that NOx emissions decrease. Turbochargers and aftercoolers are likely to be utilized for achieving a NOx emission standard of 5.8 g/bhp-hr (CARB, 1991).

Several of these engine technologies were evaluated in a project conducted by EXXON and the Santa Barbara Air Pollution Control District (SBAPCD) in 1991 to demonstrate the application of on-highway technologies to off-highway construction equipment. The project consisted of modifying a new Caterpillar 3306 DITA engine, for use in a Caterpillar 637E scrapper, to achieve a NOx emission target level of 5 g/bhp-hr (on-highway NOx standard). The 3306 DITA engine modifications included: injection timing retard, adding a high-pressure injection pump, and altering the fuel injector system. These modifications lowered the NOx emission level from a 6.6 g/bhp-hr baseline to 4.8 g/bhp-hr (without a severe fuel penalty), based on emission testing conducted by the SouthWest Research Institute (SWRI).

Further emission reductions are also possible through the additional use of sophisticated electronic injection control, air-to-air aftercooling, higher fuel injection pressures, exhaust gas recirculation (EGR), advanced aftertreatment systems, and alternative fuels. These technologies will require the transfer of on-road emission control technologies and experience to off-road applications.

Sophisticated electronic injection combined with higher fuel injection pressures allows for controlling injection characteristics and pressures at all loads and speeds. Through the use of advanced sensors, these systems can optimize the combustion process, thereby resulting in lower NOx emissions. Lower combustion temperatures (thus lower NOx emissions) also occur by adding air-to-air aftercooling, which is more efficient at extracting heat than the typical jacket water charge air cooling used in current heavy-duty off-road diesel equipment. EGR reduces NOx by lowering peak combustion temperatures, diluting the intake charge with combustion gases. Aftertreatment systems will consist of advanced lean NOx (DE-NOx) catalysts which catalytically reduce NOx by using exhaust hydrocarbons as the reducing agent (Acurex, 1993).

The use of alternative fuels (e.g., methanol, natural gas) in on-road vehicles is well established, and staff believes that this technology can be transferred to off-road equipment. Alternative fuels, such as methanol and natural gas, in off-road vehicles and equipment are likely to offer the greatest potential in reducing emissions and meeting the more stringent optional NOx emission standards considered under the Proposed Rule 1620. Methanol-fueled engines are expected to achieve about 50 percent reductions in NOx emissions from equivalent diesel engines. On-road natural gas-fueled engines have been tested at NOx levels below 2 g/bhp-hr (Acurex, 1992). The ARB has also certified a CNG-fueled heavy-duty bus engine at 2.0 g/bhp-hr.

Under Proposed Rule 1620, MSERCs for off-road diesel cycle equipment are expected to be generated by applying current and future on-road diesel emission control technologies, advanced catalyst technologies, or the use of alternative fuels. However, the applicability and effectiveness of these technologies in off-road engines would depend on engine/equipment type and specific operations.

Utility service vehicles are the other category of off-road equipment which are subject to the proposed rule. Utility service vehicle engines less than 25 hp share many similarities to small utility engines. They are predominantly gasoline-fueled, two or four stroke, and air cooled designs. Engines greater than 25 hp are usually multi-cylinder; air or water cooled; and either gasoline, diesel, or alternatively fueled engines. The emission control technologies used to meet the adopted ARB emission standards are also similar to those used to meet the emission standards for utility and lawn and garden equipment engines (e.g., carburetor adjustments, improved cooling, and catalytic aftertreatment) (CARB, 1993).

For utility service vehicles, MSERCs can only be generated by purchasing electric (e.g., battery-powered) units since optional emission standards are not expected to be adopted by the ARB. Electric-powered units will be considered as being certified to meet an optional emission standard of zero g/bhp-hr.

The use of electric (e.g., battery-powered) utility service vehicles is well established. Battery systems for electric utility vehicles are available in 12, 24, 36, 48, and 72 volt systems. Battery charging times vary considerably, depending on the system and battery condition, but are usually between 6 to 9 hours. The majority of electric utility vehicles are equipped with automatic on-board charging units which prevent over-charging by sensing when the battery system is fully charged and then shutting down the charging process. This system obviates the need for an operator to estimate the required charging time, and prolongs battery life. Battery life is estimated to be about 3 years.

SUMMARY OF RULE REQUIREMENTS

The proposed rule provides a mechanism for issuing NOx, VOC, CO, PM, and SOx MSERCs to equipment operators who voluntarily purchase new low- or zero-emission off-road equipment, or repower or retrofit existing equipment to achieve low-emission credit standards, or permanently replace existing off-road diesel cycle equipment with non-polluting alternatives. The proposed rule also allows for the generation of MSERCs based on the purchase of low- or zero-emission equipment or permanent replacement of existing equipment with non-polluting alternatives prior to the effective date of the proposed rule which is January 1, 1996. Proposed Rule 1620 establishes requirements for equipment operators, submission of applications and operating data, issuance of credits, MSERC calculation, use of credits, recordkeeping and enforcement.

Equipment Operator Requirements

Off-road equipment operators interested in participating in this program could implement several strategies to generate credits. These include: (1) purchasing new low- or zero-emission equipment; (2) repowering existing equipment with an ARB-certified on-road or off-road engine, or with an off-road engine upgraded to an ARB-certified on-road engine configuration; (3) retrofitting existing equipment engines with alternative fuel certified conversion kits or with non-certified conversion kits (e.g., on-road emission control technologies); or (4) permanently replacing existing off-road equipment with non-polluting alternatives (e.g., replacement of off-road haul trucks with electric conveyor systems).

In order to generate credits, new, repowered, or retrofitted equipment have to meet one of the applicable optional emission standards specified in the ARB's mobile source credit guidelines for off-road equipment and vehicles. The use of certified engines or conversion kits, or upgrading existing off-road engines to certified on-road engine configurations (which are already certified to meet one of the optional emission standards) will eliminate the need for unnecessary emission testing of each individual engine, saving the equipment operator time and money.

As an alternative method of compliance with optional emission standards, equipment operators, who operate low- or zero-emission equipment without using certified engines or conversion kits, could apply for credits by providing the District with emissions test data based on the ARB's applicable certification test methods.

For establishing the baseline emission standard, the equipment operator will have the option to use either the appropriate ceiling emission standard referenced in the ARB's mobile source credit guidelines or the actual emission level of the existing equipment targeted for repowering, retrofitting, or permanent replacement. Equipment operators, seeking to establish the baseline emission standard based on the actual emission level of the equipment, will be required to submit emission test data using the ARB's applicable test protocols and procedures for District approval.

To initiate the credit application process, equipment operators are required to submit an off-road MSERC Application within 90 days after operation of the new, repowered, or retrofitted equipment or the non-polluting alternative. However, for projects involving the purchase of new low- or zero-emission equipment or non-polluting alternatives that occurred prior to rule effective date, the equipment operator must submit an application within one year following the rule effective date. Applications received after the 90-day period (for projects occurring after rule effective date) and the one-year period (for purchasing projects prior to rule effective date) will still be accepted. However, the initial service date (from which the operation of equipment will qualify for credits) for these projects will be the application submittal date .

In order for MSERCs to be issued, the equipment operator must also demonstrate the continued operation of low- or zero-emission equipment or non-polluting alternative by submitting activity data on an annual basis to the District. For projects that do not involve the permanent replacement of existing off-road mobile equipment with non-polluting alternatives (i.e., purchasing, repowering, or retrofitting projects), annual activity data must be in the form of actual as well as projected operating hours for each low- or zero-emission equipment. The actual operating hours for each low- or zero-emission equipment must be monitored and documented by the equipment operator using non-resettable hour-meters. The use of non-resettable hour-meters will prevent potential tampering and issuance of credits based on inaccurate activity data. However, for projects involving permanent replacement with non-polluting alternatives, submission of annual activity data must be in the form of written notification to the District to indicate that the non-polluting alternative is still being operated. In addition, the District must be notified within 90 days after the low- or zero-emission equipment, or non-polluting alternative is retired or removed from service for an engine replacement or a major engine overhaul. For major engine overhauls or engine replacements, the equipment operator will be responsible for ensuring compliance with engine and/or conversion kit manufacturers' specifications and procedures by providing supporting documentation from the installer as part of this notification. Such notification will help ensure that credits are not being issued for emission reductions that are not taking place. The equipment operator will also be responsible for ensuring that the repowering, retrofitting, or upgrading of low-emission off-road mobile equipment is conducted based on the engine or conversion kit manufacturer's specifications and procedures (e.g., written statement from the person performing the repowering, retrofitting, or upgrading).

Application

The purpose of the Off-Road MSERC Application is to document the purchase of new low- or zero-emission equipment, or the retrofit, repower or permanent replacement of existing equipment as well as the operation of the low- or zero-emission equipment or non-polluting alternative. The Off-Road MSERC Application will contain at minimum the following information:

o a description of the repowering, retrofitting, purchasing or permanent replacement project, including at minimum the equipment type, equipment and engine manufacturer, equipment and engine model, engine model year, equipment identification number, or any non-polluting alternative methods or processes which will be used

o proof of purchase or lease of the low- or zero-emission equipment or non-polluting alternative, and proof of purchase of the certified engines and conversion kits. (Such proof could be in the form of sales contract agreement, purchase agreement, or sales receipt. In the case of a lease, a lease agreement, which states the lease period to be no less than one year, will be required.)

o the initial service date of the low- or zero-emission equipment or non-polluting alternative

o for projects involving permanent replacement, historical records on the operation of existing equipment which is permanently replaced, and proof of permanent replacement. (To ensure that the existing equipment is permanently removed from service, the equipment operator must scrap, or permanently relocate or sell the existing equipment to outside the District. The equipment operator must also demonstrate that the equipment relocated or sold outside the District is not brought back or sold back into the District.)

o load factor for each low- or zero-emission equipment supported by fuel consumption data. (To determine load factor, the equipment operator will be required to provide the fuel consumption rate at the maximum rated horsepower and during actual operating conditions.)

o emission testing results for retrofitting existing off-road equipment with non-certified conversion kits. (Emission testing must be conducted based on the ARB's applicable test procedures.)

o emission testing results for existing off-road mobile equipment from equipment operators seeking to establish baseline emission standard based on actual emission levels. (Emission testing must be conducted based on the ARB's applicable test protocols and procedures.)

o written statement from the equipment operator to verify that the repowering, retrofitting, or upgrading of existing off-road equipment engine was conducted in accordance with engine or conversion kit manufacturer's specifications and procedures

o identification of the legal owner of the MSERCs to be issued by the District

o intended use of MSERCs

Issuance of MSERCs

Issuance of MSERCs is contingent upon the approval of the MSERC Application and the actual operation of the low- or zero-emission equipment or non-polluting alternative. For projects that do not involve permanent replacement of existing off-road mobile equipment with non-polluting alternatives (i.e., purchasing, repowering, or retrofitting projects), MSERCs for the first year will be issued after the submission of the actual and projected activity data (operating hours) for the initial and subsequent six months of operation, respectively. For all subsequent years, MSERCs will be issued upon submission of the actual and projected operating hours for the previous twelve months and subsequent six-month period, respectively. In order to account for discrepancies in the projected operating hours, MSERCs issued based on projected operating hours will be adjusted annually based on actual operating hours for the same reporting period. Credit life will be based on the continued operation of each converted or new low- or zero-emission equipment, and will start when the equipment is first placed into service and end when the equipment is retired or re-engined. However, for purchases of low- or zero-emission equipment that occur prior to rule effective date, credit life will start when the off-road MSERC Application is submitted for District approval. Accordingly, for these projects, MSERCs will be issued based on the operation of the low- or zero-emission equipment immediately after application submittal.

Following a major engine overhaul, in order for MSERCs to continue, a notification must be submitted to the District to ensure that the overhauled equipment still complies with the originally certified optional emission standard. For equipment retrofitted with alternative fuel conversion kits, credit life will be based on the useful life of the conversion kit.

For projects involving permanent replacement of existing off-road mobile equipment with non-polluting alternatives, MSERCs will be issued upon approval of the Off-Road MSERC Application and be based on the historical operating data of the replaced equipment. To renew MSERCs for these projects, the equipment operator must annually notify the District in writing that the non-polluting alternative is still in service. The credit life shall end when the non-polluting alternative is removed from service.

MSERCs will be issued for NOx, VOC, CO, PM, and SOx emission reductions if mandatory emission standards for these pollutants have been adopted for the applicable equipment by the ARB or U.S. EPA, and optional emission standards have been specified in the ARB's mobile source credit guidelines for off-road equipment and vehicles. For instance, based on the ARB's credit guidelines (and optional emission standards), only NOx credits will be issued for off-road diesel cycle equipment. For off-road diesel cycle equipment, NOx is the primary pollutant of concern, and the potential to achieve significant reductions of other pollutants (VOC, CO, PM, SOx) in these engines is very limited. For projects involving the purchase of battery-powered utility service vehicles, MSERCs will be issued for all pollutants (e.g., VOC, NOx, CO, PM, SOx). Credits for SOx emission reductions will be issued based on the sulfur content and the amount of the fuels used to power the existing and replaced equipment.

As indicated earlier, new engines or conversion kits which have not been certified by ARB to meet one or more of the optional emission standards, may qualify for generating credits under the proposed rule as long as emissions test data for these engines or conversion kits is submitted to the District. In order to generate credits, such emissions testing must be conducted based on the ARB's certification test methods and must demonstrate that the emission levels of the equipment correspond to an optional emission standard, subject to District approval.

In order to increase flexibility under the proposed rule, MSERCs generated each year must be used or traded for up to two years from the date of issuance.

MSERC Calculation Methodology

The amount of MSERCs generated through the operation of low- or zero-emission off-road mobile equipment or non-polluting alternative is a function of several parameters (i.e., engine size, load factor, and annual operating hours) as well as the appropriate baseline and optional emission standards. Load factor, which is the ratio of the engine power during typical operating conditions to the engine rated horsepower will vary depending on the operation. In order to provide an accurate assessment of load factor, each equipment operator will need to submit the equipment's fuel consumption rate (under typical operating conditions) and the manufacturer's estimated fuel consumption rate (@ rated power). The load factor will be determined by taking the ratio of the actual fuel consumption rate to the rated fuel consumption rate.

The amount of credits will be calculated based on the difference between the baseline NOx, VOC, CO, and PM emission standards and the appropriate optional emission standards. The baseline (ceiling) NOx, VOC, CO, and PM emission standards apply to both new and existing equipment and are based on the ceiling emission standards referenced in the most recent version of the ARB's Mobile Source Credit Guidelines. The ARB is currently considering the mandatory California or federal emission standards, which are in effect at the time of initial application for MSERCs as the baseline emission standards. As an alternative to using the ceiling emission standards referenced in the ARB's credit guidelines, equipment operators may use actual emission levels of the existing off-road mobile equipment as their baseline as long as the emission testing is conducted in accordance with the ARB's test procedures and protocols (referenced in the California Code of Regulations, Title 13) and is submitted for District approval. However, by establishing a fixed baseline standard, individual engines will not need to be tested prior to conversion, resulting in cost savings. Equipment operators may contact the District or ARB to confirm the applicable baseline and optional emission standards before submitting the Off-Road MSERC Application.

In order to generate MSERCs, new off-road mobile equipment or off-road mobile equipment converted to low-emission configurations must be significantly cleaner than the applicable baseline emission standards and must meet one of the optional emission standards specified in the ARB guidelines for the generation credits for off-road engines. Calculation of credits will be based on actual as well as projected hours of operation for each low- or zero-emission equipment. However, in order to accurately calculate the amount of credits, MSERCs issued based on the projected annual hours of operation will be adjusted annually based on the actual hours of operation for the same reporting period. Also, in order to prevent the issuance of excessive credits, the projected operating hours should not exceed the actual operating hours for the previous six month period by 50 percent unless the equipment operator can demonstrate that the projected operating hours will occur.

The amount of MSERCs available for new projects will gradually decrease over time as ARB or U.S. EPA adopt more stringent emission standards. For instance, the California NOx emission standard for new 2001 and later model year off-road heavy-duty engines from 175 hp to 750 hp will decrease to 5.8 g/bhp-hr. Such a decrease in the mandatory emission standard would result in a lower baseline, thereby reducing the potential amount of MSERCs available. However, the baseline emission standard would not change for projects already approved for receiving credits.

For projects involving permanent replacement, MSERCs will be based on historical records of operating hours of the replaced equipment and the difference between the baseline emission standard of the replaced equipment and the optional emission standard of 0 g/bhp-hr. For these projects, the optional emission standard for non-polluting alternatives will be zero grams per brake horsepower-hour because of the use of zero-emitting alternative processes or methods.

MSERCs for NOx, VOC, CO, and PM emission reductions are calculated based on the following formula:

MSERC = [(Sbase - Sopt) x (HRS x HP x LF)]/(454 x DF)

where:

MSERC = Mobile source emission reduction credit per unit (pounds per year)

Sbase = Baseline emission standard (g/bhp-hr) for existing equipment targeted for repowering, retrofitting, or permanent replacement

Sopt = Optional emission standard (g/bhp-hr) for repowered, retrofitted, or new equipment engine

HRS = Annual hours of operation

HP = Rated horsepower (HP)

LF = Load factor

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and REG XI rules

MSERCs for SOx emission reductions are calculated using the following formula based on the sulfur content and the amount of the fuels used to power existing and converted (or new) equipment:

MSERC = 2 x ((Fbase x Sbase) - (Fopt x Sopt))/DF

where

MSERC = Mobile source emission reduction credits (pounds per year)

Fbase = amount of fuel used to power equipment targeted for repowering, retrofitting, or permanent replacement (gallons or standard cubic feet per year)

Sbase = sulfur concentration in fuel used to power equipment targeted for repowering, retrofitting, or permanent replacement (pounds per gallon or pounds per standard cubic foot)

Fopt = amount of fuel used to power low-emission equipment (gallons or standard cubic feet per year)

Sopt = sulfur concentration in fuel used to power low-emission equipment (pounds per gallon or pounds per standard cubic foot)

DF = Discount factor, equal to 1.0 for credits used for compliance with REG XV rules or NSR offsets; equal to 1.2 for credits used for compliance with RECLAIM and REG XI rules

Equipment operators will be responsible for providing the amounts of fuel used to power both the existing off-road equipment and the converted (or new) equipment at the same time that the annual operating hours are submitted to the District. The sulfur content of fuels, supplied by the District, will be the representative of average sulfur concentrations for applicable fuels used to power existing and converted (or new) equipment

A 1.2 discount factor is also applied to the emission reductions generated to comply with RECLAIM and REG XI rules which have future compliance dates to achieve net overall reductions and to account for the uncertainties associated with trading emission reduction credits from mobile sources for compliance with stationary source emission reduction requirements. For credits generated for compliance with REG XV rules, a 1.0 discount factor will apply since the same level of uncertainties would exist for using mobile source credits to comply with other mobile source reduction requirements. Also, for credits generated for compliance with NSR offsets, a 1.0 discount factor will apply because these credits are already discounted by a factor of 1.2.

Uses of MSERCs

In order to provide maximum flexibility, the proposed rule allows MSERCs to be used for the following applications:

1. RECLAIM Trading Credits;

2. Alternative method of compliance with District Regulation XI rules with future compliance dates, except to remove emission control equipment or the replacement of compliant with non-compliant materials;

3. Alternative method of compliance with District Regulation XV rules that allow the use of MSERCs in accordance with Regulation XV;

4. As New Source Review (NSR) offsets for emission increases at new or modified facilities that are subject to Rule 1303 (b)(2) pursuant to provisions in Regulation XIII;

5. Voluntary retirement of MSERCs for air quality benefits; and

6. Alternative method of compliance with any District regulation which allows the use of credits.

Because of the lack of a mechanism to convert MSERCs into emission reductions for Regulation XI purposes, the user is required to submit a compliance plan which will demonstrate that equivalent emission reductions are achieved through the use of MSERCs

Also, in order to prevent inter-basin trading of credits, MSERCs must be used or traded only within the air basin where the operator is based.

Recordkeeping and Compliance

Compliance measures are necessary to ensure that the operation of the converted equipment results in real emission reductions throughout the credit life. Therefore, equipment operators receiving MSERCs would be responsible for maintaining records including, but not limited to, activity data (i.e., monthly hour-meter logs obtained from non-resettable hour-meters), fuel consumption data (monthly fuel usage logs), and maintenance and repair records for the two most recent years of operation. Such records are necessary to verify the accuracy of activity data and continued eligibility of the equipment generating MSERCs. Monthly hour-meter logs as well as fuel usage logs would provide the necessary means to verify the actual operating data reported by the equipment operator.

For purposes of ensuring compliance with the proposed rule, the District may audit relevant records and files, or inspect the low- or zero-emission equipment or non-polluting alternative to verify operation. The District may also require emission testing of the low-emission equipment, at an approved designated facility and at District's expense, to verify continued compliance with optional emission standards. In addition, the District may disallow and/or void MSERCs, or impose penalties depending on the type of non-compliance.

Requirements for Public Notice

As required by state law, the issuance of MSERCs to be used as ERCs for compliance with NSR offsets must undergo a public notice review and comment period prior to final approval. Following a completeness determination of the Off-Road MSERC Application and prior to issuing a public notice, the District is required to determine compliance with the provisions of this rule and specify in writing whether the MSERC Application should be approved or disapproved. A notice in at least one newspaper of general circulation in the District must then be published specifying the District's determination. The notice shall provide 30 days from the date of publication for the public to submit written comments on the preliminary decision. The District will make available for public inspection all information submitted by the applicant, supporting analysis for the preliminary decision, and the preliminary decision to grant or deny the MSERCs.

Appeal of Disapproval of MSERC Issuance

In order to provide an applicant a mechanism to appeal the District's decision to disapprove the Off-Road MSERC Application, the applicant may, within 30 days of receipt of a notice of disapproval, request the hearing board to hold a hearing on whether the application was properly disapproved.

POTENTIAL EMISSIONS IMPACTS

The overall emissions reduction potential from this rule would be proportional to the number and types of off-road equipment repowered, retrofitted, purchased, or permanently replaced with a non-polluting alternative, and is unknown at this time due to the voluntary nature of the program. However, in order to provide an estimate of the range of potential emission reductions, three possible credit generation scenarios were examined and the results are presented in Table III.

Under the first scenario, an off-road haul truck is repowered with an on-road engine certified to meet an optional emission standard of 5 g/bhp-hr of NOx. This will be the case where the certified on-road version of the off-road equipment is available and can fit into the off-road equipment chassis without major modifications. Under the second scenario, the off-road engine powering the scraper axle of a tractor-scraper is retrofitted with on-road emission control technologies (i.e., injection timing retard and high pressure fuel injection) to meet a NOx level of 5 g/bhp-hr. In this case, since the equipment is retrofitted with a non-certified conversion kit, the equipment operator will be responsible for emission testing of the retrofitted engine. Under the third scenario, a new battery-powered utility service vehicle is purchased for carrying personnel and cargo. Battery-powered equipment or any other form of non-polluting alternatives will be considered as being certified to a zero g/bhp-hr. For each credit generation scenario, Table III provides the size of each engine, operating hours and load factor for each equipment as well as the applicable baseline emission standards and the optional emission standard achieved. The baseline emission standards shown in Table III for the first two scenarios are based on the NOx ceiling emission standard which is referenced in the ARB's Mobile Source Credit Guidelines. However, it should be noted that the amount of MSERCs (shown as emission reductions for these two scenarios) would increase if the actual NOx emission level of the existing off-road mobile equipment is used as the baseline emission standard.

Table III

Examples of Potential Emission Reductions

Under Proposed Rule 1620

NOx NOx
Credit Engine Baseline Optional Hours Emission
Generation Size Standard Standard of Load Reductions
Scenario (hp) (g/bhp-hr) (g/bhp-hr) Operation Factor (lbs/yr)

Repower
with 230 6.9 5 2000 0.55 1060
On-Road
Engine

Retrofit
with Clean 270 6.9 5 2000 0.55 1240
Diesel
Technology

Purchase
of Utility 22 10* 0 500 0.6 145*
Service
Vehicle

* Baseline standards and emission reductions for utility service vehicles are for the combined VOC and NOx pollutants. Based on the ARB, 70% of the baseline standards (and emission reductions) can be attributed to VOC, and 30% to NOx based on the certification emission values. The emission reductions considering all pollutants (i.e., NOx, VOC, CO, PM) are 780 lbs/yr.

It should be emphasized that the emission reductions generated from this program will be used or traded for compliance with District's regulations such as RECLAIM, and Regulations XI and XV. However, net air quality benefits will be achieved when MSERCs generated under the proposed rule are (1) discounted by a factor of 1.2 (for RECLAIM and REG XI compliance only), or (2) retired voluntarily.

COST-EFFECTIVENESS

The cost-effectiveness of the proposed rule is unique to each project and will depend on a number of factors such as the type of equipment; whether the operator purchases new equipment, or repowers or retrofits existing equipment; equipment cost; equipment life; equipment activity data (i.e., hours of operation); and optional emission standard sought. Therefore, an overall cost-effectiveness for this rule can not be determined at this time. Again, in order to provide an estimate of the range of the cost-effectiveness for various projects, sample cost-effectiveness analysis for the three credit generation scenarios, described in the previous section, is presented in Table IV. Table IV provides the incremental capital as well as operating and maintenance costs, the potential emission reductions, and the cost-effectiveness for each scenario.

Under the first scenario, the incremental capital cost of $17,000 is the difference between the capital and installation cost of $27,000 for an on-road heavy-duty diesel engine certified at 5.0 g/bhp-hr NOx level and the cost of overhauling an existing off-road heavy-duty diesel equipment engine at a cost of $10,000 (Lowrey, 1995; White, 1995). For the second scenario, the incremental capital cost of $14,000 is based on retrofitting an existing off-road engine by changing to a high pressure fuel injection system and retarding fuel injection timing at a cost of $4,000 plus the cost of emission testing estimated at $10,000 (SWRI, 1991). Incremental capital cost for utility service vehicles is based on the purchase price of $8,300 for a new electric-powered utility service vehicle and the purchase price of $8,650 for a new gasoline-powered utility service vehicle. The operating and maintenance (O&M) costs for the first two scenarios involving repowering and retrofitting diesel engines were assumed to be equal, resulting in an incremental cost of zero. The O&M costs for electric utility service vehicles were $370 and $160, respectively. The O&M costs for gasoline utility service vehicles were $445 and $360, respectively (Sneller, 1995). Cost-effectiveness analysis was conducted based on the discounted cash flow method, assuming a 10 year equipment life, 4 percent inflation rate, and 1995 dollars.

Table IV

Examples of Cost-Effectiveness Analysis

Under Proposed Rule 1620

Incremental Incremental NOx
Credit Capital O & M Emission Cost-
Generation Cost Cost Reduction Effectiveness
Scenario ($) ($/year) (pounds/year) ($/ton)

Repower
with $17,000 0 1,060 $3,200
On-Road
Engine

Retrofit
with Clean $14,000 0 1,240 $2,200
Diesel
Technology

Purchase
of Utility -$350 -$280 145 Savings
Service
Vehicle

The cost-effectiveness values presented in Table IV do not take into account the 1.2 discount factor applied to the emission reduction credits generated under the proposed rule (i.e., for compliance with Regulation XV). When the discount factor is taken into consideration, the cost-effectiveness increases by a factor of 1.2 (i.e., for compliance with RECLAIM and Regulation XI). Therefore, the new cost-effectiveness values for the first two scenarios will be $3,800 and $2,600, respectively. Also, as indicated in the previous section, if the actual emission level of the existing off-road equipment is used as the baseline emission standard, the potential emission reductions will increase and therefore the cost-effectiveness values for the first two scenarios will decrease due to the increased amount of MSERCs available.

The proposed rule provides an alternative, and in some cases a less costly, method of compliance with District's emission reduction requirements. Cost-effectiveness will be the primary criteria for equipment operators in determining whether to comply with District regulations by meeting their specific requirements or by generating credits under the proposed rule. Therefore, equipment operators, interested in participating in this voluntary credit program, must consider the cost of compliance with District regulations as compared to the cost of generating MSERCs, based on their specific operational conditions and compliance requirements, and select the most cost-effective option.

PUBLIC COMMENTS

The District staff held a public workshop on June 14, 1995 to solicit public input and comments on Proposed Rules 1620 and 1612 (Credits for Clean On-Road Vehicles). A total of 74 persons attended the workshop. Both oral and written comments were presented at the workshop or submitted prior to the close of the comment period (June 28, 1995). Because of the issues raised at the workshop, a public consultation meeting was held on July 6, 1995 to solicit further public input on these issues. The public was invited to provide further written comments by July 20, 1995. The following is a list of all commentators who commented on Proposed Rules 1620 and 1612. Some commentators commented on both rules where others provided comments on individual rules only. Fourteen commentators commented on Proposed Rule 1620. The following section provides staff's responses to all comments received on Proposed Rule 1620.

List of Commentators

  Comment #                  Commentator                   Subject Rule     


      1        3M                                             PR1620        

      2        Antelope Valley Bus                            PR1612        

      3        Battery Automated Transportation               PR1612        

      4        California Air Resources Board             PR1612/PR1620     

      5        California Energy Commission               PR1612/PR1620     

      6        California Trucking Association                PR1612        

      7        City of Los Angeles                        PR1612/PR1620     

      8        Coalition for Local Environmental          PR1612/PR1620     
               Solutions and Competitive Economy                            

      9        Construction Industry Air Quality          PR1612/PR1620     
               Coalition                                                    

      10       Engine, Fuel, & Emissions Engineering      PR1612/PR1620     

      11       Los Angeles County Sanitation District     PR1612/PR1620     

      12       National Association of Fleet                  PR1612        
               Administrators                                               

      13       SCEC                                           PR1620        

      14       Shephard Machinery Company                 PR1612/PR1620     

      15       Southern California Edison                 PR1612/PR1620     

      16       The Gas Company                                PR1612        

      17       UNOCAL                                     PR1612/PR1620     

      18       U.S. Environmental Protection Agency       PR1612/PR1620     

      19       Vinyard Engine Systems                         PR1612        

      20       Western States Petroleum                   PR1612/PR1620     

Comment #1-1 Paragraph (b)(1) is too restrictive. We request that staff consider using actual emission levels provided by manufacturers as baseline. Lower baselines provide no incentive to replace older vehicles.

Response #1-1 In order to provide additional incentives, the proposed rule has been revised to include a provision to allow equipment operators to use actual emissions test data or baseline emission standards referenced in the ARB's Mobile Source Credit Guidelines. Such emission test data must be done in accordance with the test procedures and protocols established by the ARB in the California Code of Regulations, Title 13, and be submitted for District's approval.

Comment #1-2 Proposed Rule 1620 (Paragraphs (b)(6) and (b)(15)) do not provide incentives to replace existing equipment with more efficient or non-polluting alternatives (e.g., replacement of off-road trucks with electric conveyor belts).

Response #1-2 The proposed rule has been revised to include provisions which will allow for generation of credits based on permanent replacement of existing off-road equipment with non-polluting alternative methods or processes (e.g., conveyor belts). New definitions for "Permanent Replacement" and "Non-Polluting Alternatives" have also been added to the proposed rule for clarification purposes. Equipment operators will be responsible for providing documentation to support the permanent replacement of equipment (i.e., scrapping, relocating, or selling to outside the District) as well as installation and operation of non-polluting alternatives.

Comment #1-3 Amend paragraph (c)(5) to allow other pollutants to increase up to, but not over, the mandated emission standards. This is needed because other pollutants may increase as a result of efforts to decrease NOx.

Response #1-3 Under the ARB's guidelines, in order to generate NOx credits, pollutants other than NOx can not increase beyond emission standards for off-road diesel cycle engines. Paragraph (c)(5) of the Proposed Rule 1620 mirrors this requirement by allowing other pollutants to increase up to, but not go beyond, the mandated standards for new off-road engines.

Comment #1-4 The definition for Zero-Emission Equipment is limited to battery-powered equipment.

Response #1-4 Staff revised the definition for zero-emission equipment to include any equipment which produces zero emissions of any criteria pollutants under all possible operation modes and conditions.

Comment #1-5 The definition for Equipment should be revised to include non-mobile types of equipment.

Response #1-5 Proposed Rule 1620 applies to mobile (self-propelled) off-road equipment engines for which mandatory emission standards have been adopted by the ARB or U.S. EPA, and for which optional emission standards have been specified in the ARB's mobile source credit guidelines. At this time, these equipment will include off-road diesel cycle engines at or above 50 horsepower (per ARB's mobile source credit guidelines) and battery-powered utility service vehicles (which qualify as meeting an optional emission standard of 0 g/bhp-hr). In addition, the proposed rule allows the issuance of credits for the permanent replacement of existing off-road equipment with non-pollutant alternatives (e.g., electric conveyor systems). Non-mobile or portable equipment are currently subject to the District Rules 203 and 1110.2 which require these engines to be permitted and to comply with NOx and ROG emission limits, respectively. These engines will also be evaluated under the District's proposed area source credit program for generating credits.

Comment #1-6 We suggest that paragraph (e)(4) be amended to maintain credits after retirement from service of low-emission equipment due to maintenance or safety reasons and replacement with a lower emitting equipment.

Response #1-6 Issuance of credits will cease only when the low-emission equipment is either permanently retired or removed from service for engine replacement. Following the equipment retirement and replacement with a new low-emission equipment, a new Off-Road MSERC Application as well as annual operating data for the new equipment must be submitted to the District. Calculation of the appropriate amounts of credits will then be based on the annual operating hours (actual and projected operating hours), engine size, and load factor of the new low- or zero-emission equipment as well as the new optional emission standard that the new equipment certifies to.

Comment #1-7 Proposed Rule 1620 should allow an alternative for setting the baseline emission standard based on fuel usage and appropriate emission factors. Fuel usage plus emission factors are a better indicator of baseline emissions.

Response #1-7 Baseline/mandatory emission standards (as well as optional emission standards) for off-road equipment adopted by the ARB or U.S. EPA are established in units of grams/brake horsepower-hour (g/bhp-hr). Certification of new off-road engines is conducted based on a standardized 8-mode cycle steady state test procedure for uniformity purposes and to ensure the repeatability of test results. Therefore, calculation of emissions and credits will depend on the engine's emission rate (g/bhp-hr), engine size, operating hours of the equipment, and specific load factor. The ARB's guidelines for generating mobile source credits from off-road equipment also rely on the same methodology.

The use of fuel consumption data and fuel-based emission factors may not provide a reliable mechanism to determine emissions (or credits) for off-road equipment. Although fuel usage data may be available, fuel-based emission factors have not been established by the ARB or U.S. EPA for off-road equipment to accurately capture various duty cycles experienced by these equipment. In contrast, staff believes that the current emission standard levels (adopted by ARB or U.S. EPA) in combination with a load factor which characterizes the actual operating conditions of the converted equipment, provide a more reliable mechanism for calculating credits.

The proposed rule has been revised to clarify that the load factor, which is the ratio of the engine power output during typical operating conditions to the engine rated horsepower, will be determined based on fuel consumption data. As such, the load factor will be calculated based on the fuel consumption rate at maximum rated horsepower (supplied by engine manufacturer) and the fuel consumption rate under actual operating conditions (from equipment operator).

Comment #1-8 We suggest that optional emission standards be allowed to decrease in smaller g/bhp-hr increments (i.e., 0.1 to 0.2 g/bhp-hr)

Response #1-8 The primary reason to limiting the optional emission standards to 0.5 g/bhp-hr is the variability in emissions from different engines within a certified engine family. For instance, individual engines in an engine family certified to a 5.0 g/bhp-hr NOx may be at 5.0, 5.1, or 4.9 g/bhp-hr NOx even though they are all certified to a 5.0 g/bhp-hr standard. For alternative-fueled engines, emissions variability is a greater concern due to uncertainties associated with their emissions performance (i.e., possible degradation of emission level over time). The 0.5 g/bhp-hr increments will provide assurance that the engines are certified with a reasonable compliance margin to allow for test and production variations. Therefore, in conjunction with the ARB's guidelines, and in order to ensure that appropriate amounts of credits are issued, optional emission standards are considered at 0.5 g/bhp-hr increments.

Comment #1-9 Proposed rule 1620 should allow inter-pollutant trading (i.e., between NOx and VOC).

Response #1-9 The issue of inter-pollutant trading is being evaluated by staff as part of the inter-credit trading study to be completed this fall. Pending the findings of this study, the proposed rule will be revised if necessary.

Comment #1-10 We suggest that banking of credits for up to 4 years be allowed so that operators can better plan the use of credits.

Response #1-10 In order to increase flexibility under the MSERC program, staff has included a provision in the rule which would allow the use or trading of credits generated in any year for up to two years. Several issues regarding the use of banked credits in future years, which may affect the ozone attainment demonstration, need to be addressed first. These issues will be addressed as part of the inter-credit trading study.

Comment #1-11 The 20% discounting of emission reductions may eliminate much of the incentive to generate credits. We suggest a 10% discount factor.

Response #1-11 The proposed rule originally applied a 1.2 discount factor to the emission reductions generated from the program to account for uncertainties associated with emission factors and activity data as well as to achieve net emission reductions. Under the revised rule language, the 1.2 discount factor will only be applicable to credits generated for compliance with RECLAIM and REG XI rules, due to the inherent uncertainties with the crossover between mobile and stationary source emission reductions (i.e., trading mobile source emission reductions to comply with stationary source emission reduction requirements). For credits generated for compliance with REG XV rules, a 1.0 discount factor will apply since the same level of uncertainties exists for using mobile source credits to comply with other mobile source reduction requirements. Also, for credits generated for compliance with NSR offsets, a 1.0 discount factor will apply because REG XIII already discounts credits by a factor of 1.2. The discount factor issue will also be addressed as part of the inter-credit trading study.

Comment #1-12 We recommend to expand the program to include off-road engines between 50 and 175 hp.

Response #1-12 Definition for Equipment has been revised in the proposed rule to include off-road equipment engines for which the ARB or U.S. EPA have established mandatory and optional emission standards. Therefore, off-road diesel engines between 50 to 175 hp are included under the proposed rule.

Comment #1-13 We recommend that the credits be issued at one or two dates per year (e.g., next following RECLAIM anniversary dates) to simplify tracking and to maximize use of credits.

Response #1-13 Under the proposed rule, RECLAIM facilities will be able to use MSERCs either on the scheduled RECLAIM Trading Credit (RTC) issue date immediately following the date on which the MSERCs are issued, or if requested, in the current compliance year. For example, MSERCs issued in the month of April may either be used during the current RECLAIM period (i.e., cycle 1) or be used in the following compliance period (i.e., cycle 2).

Comment #4-1 The ARB's proposed guidelines for the off-road heavy-duty diesel cycle engines recommend MSERCs to be issued for NOx only. It is recommended that the rule be limited to the scope of the guidelines.

Response #4-1 Staff had originally proposed that NOx emission reduction credits be issued for diesel equipment and VOC, NOx, and CO emission reduction credits be issued for only non-diesel equipment (i.e., utility service vehicles) for which California emission standards have been established. However, the proposed rule has been amended so that credits will be issued for all pollutants (i.e., NOx, VOC, CO, PM) regardless of the type of engine, as long as both baseline emission standards have been adopted by either ARB or U.S. EPA, and optional emission standards have been specified in the ARB off-road credit guidelines. In addition, credits for SOx will also be issued and will be based on the difference between: the sulfur content of the fuel used for the existing and low-emission equipment, and the fuel consumption rates for the existing and low-emission equipment. Issuing credits for pollutants other than NOx is being done in order to provide the maximum flexibility and incentive for participants to generate credits. For off-road diesel cycle engines, only NOx credits will be available since ARB's guidelines only specify NOx optional emission standards. Special provisions are included in the proposed rule for utility service vehicles which are not mentioned in the ARB guidelines. Accordingly, these vehicles will be able to generate credits for all pollutants for which there is a California emission standard (i.e., NOx, VOC, CO, PM). In the absence of optional emission standards for these vehicles, credits will only be issued for vehicles operated solely by non-polluting power sources (e.g., battery-powered)

Comment #4-2 Section (b)(2) defines a "certified engine" as one which has been certified to meet one of the ARB adopted optional emission standards. Since there are no adopted optional emission standards, it is recommended that the definition be amended to clarify that a certified engine is an on-road engine certified to the proposed heavy-duty diesel truck standards.

Response #4-2 Staff is aware of the inconsistency associated with the absence of adopted optional emission standards and has amended the rule language to make reference to the optional emission standards specified in the ARB guidelines for the generation of emission reduction credits from off-road diesel cycle engines greater than 50 hp, instead of Title 13 of the California Code of Regulations. Under the revised rule language, a certified engine includes an ARB-certified on-road or off-road engine, or an off-road engine which has been upgraded to the configuration of an ARB-certified on-road engine.

Comment #4-3 Section (b)(4) does not clearly state that the only equipment covered by the proposed rule is powered by diesel cycle engines. Since the guidelines are intended for heavy-duty diesel cycle engines, it is recommended that the definition be amended to reflect this distinction.

Response #4-3 Staff is not considering to limit the applicability of the rule to off-road diesel cycle engines because the proposed rule is meant to be broad enough to accommodate other off-road mobile equipment categories for which mandatory and optional emission standards will be established in the future by the ARB or U.S. EPA (i.e., off-road gasoline- or LPG-powered engines greater than 25 hp). At this time, however, the only off-road equipment that can participate in the program include off-road diesel cycle engines at or above 50 hp (as specified in the ARB's guidelines) and utility service vehicles.

Comment #4-4 Section (b)(8) should be amended to include the following language "in accordance with the Air Resources Board's Mobile Source Credit Guidelines."

Response #4-4 Staff has amended the proposed rules to include the recommended language.

Comment #4-5 Since ARB has not adopted optional emission standards for off-road engines in Title 13 of the California Code of Regulations, it is recommended that the definition in section (b)(10) be clarified to define optional emission standards in terms of the proposed on-road optional emission standards.

Response #4-5 The reference to Title 13 of the California Code of Regulations has been removed in paragraph (b)(10). The revised definition for optional emission standard now includes a reference to the ARB guidelines for the generation of emission reduction credits from off-road engines and the specified optional emission standards in these guidelines.

Comment #4-6 The purchase of new equipment for credits is outside the scope of the ARB off-road MSERC guidelines. Allowing credits for augmenting an existing fleet with low- or zero-emission equipment may conflict with the credits being "real," in that no existing emissions are being reduced. It is recommended that existing equipment be retired or replaced if credits are to be issued for new purchases of low- or zero-emission equipment. Also, for consistency with Proposed Rule 1612, the language of (c)(1) should be clarified by stating that the credits will be "granted for the operation" instead of "generated for the purchase."

Response #4-6 In order to increase flexibility and participation in the off-road credit program, the proposed rule goes beyond the scope of the ARB's current off-road credit guidelines by granting credits for new purchases of low- or zero-emission equipment as well for permanent replacement of existing equipment with non-polluting alternatives. As a secondary benefit, broadening the scope of the credit program will increase the penetration of low- or zero-emission equipment and vehicles into the off-road sector. Staff considers the emission reductions associated with new purchases of low- or zero-emission equipment to be "real," since equipment operators would have routinely purchased equipment (or rebuilt existing engines) having emission levels far above the optional emission standards, resulting in higher emissions. Adding a retirement or replacement provision for projects involving the purchase of low- or zero-emission equipment in the proposed rule would be too restrictive and would disincentivize the program. Additionally, staff considers it is unnecessary to modify the language of paragraph (c)(1) of the proposed rule to be consistent with Proposed Rule 1612, since paragraphs (d)(2) and (d)(3) of the revised rule language require that the equipment operator demonstrate the continued operation of the equipment by submitting actual and projected operating hours.

Comment #4-7 Issuing credits for projects involving non-diesel equipment is outside the scope of the ARB credit guidelines. Language should be added to specify appropriate ceiling and threshold credit standards for pollutants other than NOx. Adding an in-use compliance testing provision is recommended to ensure that the reduced emission levels associated with this program are maintained during the credit life.

Response #4-7 At this time, the only non-diesel equipment that can generate credits under the proposed rule are utility service vehicles. The appropriate ceiling or baseline emission standards for this category of engines will be the California emission standards for specialty vehicles, adopted as part of the off-road recreational vehicle regulation in Title 13 of the California Code of Regulations. The definition for baseline emission standard has been revised accordingly. In the absence of optional emission standards for these vehicles, credits will only be issued for non-polluting versions of vehicles (e.g., battery-powered).

In-use compliance testing is not required under the proposed rule. Deterioration of emission levels of low-emission equipment is only a concern with alternative fuel conversion kits. For projects involving the use of certified conversion kits, credit life will be the durability period for which the conversion kit is certified to meet one of the optional emission standards.

Comment #4-8 Section (f)(1) should be amended to add the word "engine" after "equipment" in the definition for Sopt.

Response #4-8 The definition for Sopt has been amended according to the recommendation.

Comment #5-1 You might want to include the term rebuild instead of overhaul.

Response #5-1 As part of the rule development effort, staff inquired as to what was the most appropriate term, used by operators and individuals performing equipment maintenance, to describe the complete repair, cleaning, adjustment, and major component replacement of a heavy-duty off-road diesel cycle engine. The majority of individuals contacted indicated that the most often used term was overhaul (or major engine overhaul). Although rebuild is often used as well, the proposed rule contains the term major engine overhaul for purposes of uniformity. However, both terms are interchangeable.

Comment #7-1 The City of Los Angeles recommends that the recordkeeping and reporting requirements of the program be streamlined to minimize the administrative burden on fleet operators and to maximize participation.

Response #7-1 In order for the District to adequately document the continuous operation of the low- or zero-emission equipment, the proposed rule requires that records such as monthly hour-meter and fuel consumption logs as well as routine maintenance and repair records be maintained by the equipment operator. It is the District's understanding that such records are already kept by some operators and therefore such a requirement would not present any additional burden. However, in order to streamline the process, staff has revised the proposed rule to only require that necessary records be kept for the two most recent years of operation, instead of until one year following the retirement or removal of the low- or zero-emission equipment. Such minimum requirements are needed to ensure proper enforceability of the rule.

With respect to annual reporting requirements, the proposed rule requires the submittal of actual and projected operating data in order to issue credits for each year. Because of great variability in off-road equipment types and applications, it is necessary that MSERCs be issued based on actual operating hours of each low- or zero-emission equipment for each specific project.

Comment #7-2 In order to encourage more fleet operators to participate in this program, District should explore the possibility of an optional one-time credit (lesser amount) to equipment operators who purchase clean off-road equipment without having to comply with recordkeeping requirements.

Response #7-2 Under the proposed rule, issuance of credits is based on actual operation of each low- or zero-emission equipment under specific operating conditions. Both recordkeeping and reporting requirements are therefore required to ensure that appropriate amounts of credits are issued. Issuance of an optional one-time credit will not be enforceable since actual operational information must be obtained. The commentator is also referred to the response to comment #7-1.

Comment #7-3 Penalties for non-compliance will discourage fleet operators from participating in the program.

Response #7-3 In order to ensure that the provisions of this voluntary rule are complied with, equipment operators who opt to participate in this program are subject to non-issuance and/or voidance of credits and/or non-compliance penalties. Under Health and Safety Code, the District can exercise its right to use discretion in assessing an appropriate penalty for violation of the proposed rule.

Comment #7-4 The proposed rule should be revised to allow for retroactive credits for clean off-road equipment purchased after January 1991.

Response #7-4 Issuing MSERCs retroactively is not being considered for the proposed rule because the intent is to provide an incentive for equipment operators to purchase low- or zero-emission equipment or retrofit their existing equipment to achieve low emission levels beyond what they would have done if such a credit program did not exist. However, in order to recognize past efforts, staff has revised the proposed rule to allow for generation of credits for those low- or zero-emission equipment and vehicles which were placed into service prior to the proposed rule effective date. For these projects, only the operation of the low- or zero-emission equipment and vehicles which occurs after the proposed rule effective date and following submittal of the Off-Road MSERC Application will be eligible for credits.

Comment #7-5 In order to provide greater flexibility to comply with District regulations, banking of credits is recommended to be included in the proposed rule.

Response #7-5 The commentator is referred to the response to comment #1-10.

Comment #7-6 The rule should provide an option for the generation of PM10 and SOx credits.

Response #7-6 The commentator is referred to the response to comment #4-1.

Comment #7-7 The rule should identify an appeal process if an MSERC Application is not approved or if MSERCs are not allowed.

Response #7-7 An appeal process has been added to the proposed rule.

Comment #7-8 The proposed rule does not include a requirement for operation of equipment within the District or the Basin. Credits generated in each Basin should be used in the same Basin.

Response #7-8 The proposed rule applies to equipment operators who operate equipment within the boundaries of the South Coast Air Quality Management District. Under the revised rule language, credits can only be used or traded within the basin where the equipment operator is based.

Comment #7-9 The City recommends to minimize the use of a 1.2 discount factor, particularly for zero-emission equipment.

Response #7-9 The commentator is referred to the response to comment #1-11.

Comment #8-1 Proposed rules should be amended to allow banking of emission reduction credits so that credits could be used any year in the future. Credits will have a higher value in the future so greater levels of investment would be generated by allowing banking. Emission reductions generated today, and then deferred to a later date, have a greater positive impact on public health because they are added onto a lower baseline.

Response #8-1 The commentator is referred to the response to comment #1-10.

Comment #8-2 We recommend that the proposed rule maximize the potential uses by allowing the engine manufacturers to be able to get credit from other engine standards.

Response #8-2 Staff considers the equipment operator to be the primary party responsible for continued operation of the low- or zero-emission equipment and thus the equipment operator should receive full value for the credits issued under the proposed rule. The primary intent behind the proposed rule is to provide flexibility for local facilities to comply with District rules. Therefore, issuing credits to manufacturers, who are often located outside the Basin, would increase the cost of the credits, resulting in reduced flexibility. However, staff will continue to examine this issue for future credit rules.

Comment #8-3 It is important in maintaining interest in the program by keeping discounts to a minimum. This will encourage clean fuel technologies and maximize the available credits. An additional benefit is that the cost of pollution control will go down, as reflected by the price of credits in the market place, and the eventual penetration into the market place will increase.

Response #8-3 The commentator is referred to the response to comment #1-11.

Comment #8-4 We recommend that more flexibility be allowed for the type of verification required. For instance, there is no reason you can't use table values to project uses so long as those are periodically verified.

Response #8-4 Staff considers the type of verification required under Proposed Rule 1620 to be necessary in order to accurately determine the amount of MSERCs. Table values of average duty cycles, use (i.e., hours of operation), and emission levels are not reliable given the great variability of off-road equipment operation. For instance, not all off-road equipment engine manufacturers have developed emission factors, and those that have, may not have used approved test procedures. Because of this, off-road equipment operation needs to be evaluated on a case by case basis.

Comment #8-5 There is no reason why you have to wait to include engines for which there are no established standards (e.g., <175 hp). Including these engines is just the kind of thing that will produce reductions where none are anticipated. Engine manufacturers could supply data based on established criteria in order to obtain a baseline.

Response #8-5 In order to expand the program and at the same time be consistent with ARB guidelines, staff has revised the proposed rule to include off-road engines for which both emission standards have been adopted by the ARB or U.S. EPA and for which optional emission standards have been established by the ARB. Presently, this includes all off-road diesel cycle engines greater than 50 horsepower and utility service vehicles (battery-powered units qualify as 0 g/bhp-hr optional emission standard). The proposed rule, as drafted, will accommodate inclusion of other off-road mobile equipment (i.e., gasoline and LPG-powered off-road engine >25 hp) as soon as mandatory and optional emission standards are adopted by the ARB or U.S. EPA. However, staff is not considering expanding the program to include equipment for which there are no established emission standards or test procedures by U.S. EPA or ARB (i.e., gasoline-powered equipment greater than 25 hp). In addition, for many of these engines, emission test data is either not available, or if available, may be based on various test procedures. For off-road engines subject to the proposed rule, staff is revising the baseline emission standard definition in conjunction with the ARB's guidelines for off-road MSERCs. Staff will continue to evaluate possible credit programs for other off-road mobile source categories not currently under the proposed rule.

Comment #8-6 We suggest the use of table values or data from the manufacturers for establishing baselines.

Response #8-6 The commentator is referred to the response to comment #1-1.

Comment #9-1 Contractors who participate in the credit program may get preferential treatment under CEQA guidelines. The District should give assurances that the program will stay voluntary.

Response #9-1 The District has no control over which contractor is selected for a construction project involving the CEQA review process. It is up to the discretion of the individual project proponent to choose an appropriate contractor. Staff assumes that the selection process is competitive and is unaware of any provision in the CEQA guidelines that would give preferential treatment to a contractor who participates in a MSERC program. However, there is nothing in the CEQA guidelines to preclude a lead agency from proposing mitigation measures for a project which may require emission offsets. These emission offsets could potentially take the form of MSERCs issued under Proposed Rule 1620.

With respect to the voluntary nature of the MSERC program, Proposed Rule 1620 is a voluntary program and as such is not intended to require any person to purchase, repower, or retrofit low- or zero-emission vehicles or equipment. The District's intent behind adopting the proposed rules is to provide opportunities to generate NOx, VOC, CO, PM, and SOx mobile source emission reduction credits that can be used as an alternative means of compliance with District regulations.

The District believes that the voluntary nature of Proposed Rule 1620 is sufficiently communicated in subdivision (a), where it is stated that "These credits would be generated based on emission reductions created by the operation of low- or zero- emission equipment within the jurisdiction of the District, on a voluntary basis, that result in emission reductions beyond local, state, and federal regulations."

Comment #9-2 We are unsure on how the District will allow ERCs under REG XIII for reductions which are not permanent.

Response #9-2 Staff believes that MSERCs generated under Proposed Rule 1620 can be used to comply with the emission offset requirements of Regulation XIII. The equipment operator will be responsible for continually generating MSERCs on an on-going annual basis in order to satisfy the requirements of REG XIII. Permit conditions for new or modified facilities will reflect the requirement for these NSR offsets to be renewed annually.

Comment #9-3 Has the District considered the cost-benefit of repowering to low-emission standards and how it compares to the cost of available ERCs?

Response #9-3 Staff has performed sample cost-effectiveness analysis for Proposed Rule 1620 and the results are summarized in the Draft Staff Report for Proposed Rule 1620. Due to the voluntary nature of the credit program, it is impossible to estimate the cost-effectiveness of each individual project or overall cost-effectiveness of the proposed rule. However, sample cost-effectiveness analyses were conducted for three possible credit generation scenarios on a per equipment basis. The three credit generation scenarios included: (1) repowering with an on-road certified engine; (2) retrofitting an off-road engine with on-road emission control technologies; and (3) purchasing a new battery-powered utility service vehicle. This analysis showed that savings resulted from the purchase of battery-powered utility service vehicles while the cost-effectiveness for the two other scenarios ranged from $2,200 (retrofitting) to $3,200 (repowering) The proposed rule provides an alternative, and in some cases a less costly, method of compliance with District's emission reduction requirements. Cost-effectiveness will be the primary criteria for equipment operators in determining whether to comply with District regulations by meeting their specific requirements or by generating credits under the proposed rule. Therefore, equipment operators, interested in participating in this voluntary credit program, must consider the cost of compliance with District regulations as compared to the cost of generating MSERCs, based on their specific operational conditions and compliance requirements, and select the most cost-effective option. In addition, the Socioeconomic Report for Proposed Rule 1620 compares the cost-effectiveness of the proposed rule with those of other District programs (e.g., Regulation XI rules and RECLAIM).

Comment #10-1 What is the obstacle to allowing locomotives and marine vessels to obtain MSERCs under this program?

Response #10-1 The major obstacle to allowing locomotives and marine vessels into a mobile source credit program is that there are no emission standards or test procedures established for these sources. Furthermore, specific issues relative to the generation of credits from these sources (e.g., baseline and optional standards, credit life, MSERC calculation methodology, testing protocols) are beyond the scope of Proposed Rule 1620. However, in the Final 1994 AQMP, (Control Measure MOF-04 - Off-Road Mobile Source Emission Reduction Credit Programs), the District proposes to develop future mobile source emission reduction credit programs, and sources such as locomotives and marine vessels would be evaluated for possible inclusion into credit programs as part of that development.

Comment #11-1 Since credits are being offered for alternative compliance with REGs XI and XV, why not expand the potential use of the MSERCs to Reg IV?

Response #11-1 Regulation IV - Prohibitions, was not included as a potential use of MSERCs because most of the REG IV rules are prohibitory in nature, do not require emission reductions, or do not have future compliance dates.

Comment #11-2 Reg XIII allows inter-polluting trading and there is a possibility that these programs could accommodate inter-polluting trading as well. District staff should look into this and examine what trading ratios would be involved.

Response #11-2 The commentator is referred to the response to comment #1-9.

Comment #11-3 For diesel engines, the District should reexamine not issuing credits for pollutants other than NOx. Data will be provided later in our comment letter to show that there is potential for reductions in other pollutants.

Response #11-3 The commentator is referred to the response to comment #4-1.

Comment #11-4 Why isn't SOx part of this program given that there is a SOx RECLAIM program and SOx is a PM10 precursor?

Response #11-4 The commentator is referred to the response to comment #4-1.

Comment #11-5 The program should be designed so as to allow banking of credits that go well beyond one year.

Response #11-5 The commentator is referred to the response to comment #1-10.

Comment #11-6 The District should recognize clean fuel programs already in place and allow some form of retroactivity.

Response #11-6 The commentator is referred to the response to comment #7-4.

Comment #11-7 The recordkeeping provisions appear to be a disincentive for participating in the program. Why do you need detailed maintenance records?

Response #11-7 The commentator is referred to the response to comment #7-1.

Comment #13-1 Non-RECLAIM sources would not be able to take advantage of these programs because of the lack of permanence for NSR credits.

Response #13-1 The commentator is referred to the response to comment #9-2.

Comment #13-2 How would a source file for NSR credits under these proposals?

Response #13-2 The commentator is referred to the response to comment #9-2.

Comment #13-3 How does a RECLAIM source use MSERCs that have a beginning and ending life which is different from a sources RECLAIM cycle?

Response #13-3 The commentator is referred to the response to comment #1-13.

Comment #14-1 The 1.2 discount factor is far too restrictive given the 30 percent reduction necessary to generate credits, and the fact that the engines being replaced have two or three times the emissions of the cleaner engines.

Response #14-1 The commentator is referred to the responses to comment #1-1 and #1-11.

Comment #14-2 Replace the word "demonstration" in paragraph (c)(5) with "verification" to allow the use of manufacturer's data which shows that other pollutants do not increase.

Response #14-2 Rule language in paragraph (c)(5) in the proposed rule (and subparagraph (d)(3)(E) under the revised language) has been revised to replace the word "demonstrate" with "verify" that the operation of converted equipment will not increase emissions of other pollutants beyond the applicable emission standards. Such verification will be based on data provided by certified engine or conversion kit manufacturers.

Comment #14-3 Paragraph (e)(1) is too restrictive in that the MSERCs should be issued upon approval of the application, and then show support at a later time for the actual use of the equipment.

Response #14-3 Under the proposed rule, credits are issued after approval of the Off-Road MSERC Application and upon submittal of the actual and projected operating hours of the converted equipment. Since off-road equipment come in a variety of types and sizes and are used in multiple applications, there is a great degree of uncertainty with respect to the level of operation of each equipment type. Accordingly, the operating hours for each converted equipment would depend on specific application and operating characteristics. Therefore, in order to issue appropriate amounts of credits for each specific project, credits will be calculated based on 6 months of actual and 6 months of projected operating hours.

Comment #14-4 Subparagraph (i)(3)(B) is too excessive in the case of an oversight by an operator failing to notify the District of a replacement or retirement. You may want to set up something in Rule 301 for assessment of fees rather than rely on the Health and Safety Code which has very high penalties.

Response #14-4 The District wishes to maintain its right to use discretion in assessing a penalty for violations of the proposed rule. Reliance on the Health and Safety code offers the District with such flexibility, while assessing a fee under Rule 301 allows no flexibility.

Staff does not consider Regulation III to be an appropriate mechanism for establishing penalties for non-compliance with the proposed rule. Regulation III is structured for emission reduction purposes, and not for punitive or deterrent action. In addition, because of the availability of the Health and Safety Code, there is no need to establish a separate penalty system. Depending on the type of violations of the rule provisions, the District could disallow the issuance of, and/or void MSERCs and/or impose penalties.

Comment #14-5 It is unclear what is meant by "verification of continuous operation."

Response #14-5 Mobile source emission reduction credits can only be issued if emission reductions are real and quantifiable and that means the low- or zero-emission equipment must be put in actual operation to generate credits. Therefore, equipment operators are required to demonstrate or verify the actual operation of the equipment by submitting actual and projected operating hours and maintaining records of monthly hour meter and fuel usage logs and maintenance and repair for each low- or zero-emission equipment.

Comment #14-6 This rule should not go into effect until ARB has finalized their guidelines.

Response #14-6 Staff believes that Proposed Rule 1620 establishes an acceptable mechanism for generating credits from off-road equipment. For the most part, the proposed rule is based on the ARB's draft guidelines for the generation of MSERCs through the conversion of off-road diesel cycle engines at or above 50 horsepower to low-emission configurations. Any revisions to the ARB's draft guidelines will therefore not impact the mechanism developed under the proposed rule. However, for consistency purposes, definitions for baseline and optional emission standards, certified engine and conversion kits, and equipment have been revised to accommodate any future revisions anticipated in the ARB's final guidelines.

Comment #14-7 It is our understanding from paragraph (b)(4) that this rule only applies to 175 - 750 hp units starting in January 1996. Engines over 750 hp will not be subject to a standard until 2000; and the state is preempted from a standard for engines less than 175 hp engines.

Response #14-7 The definition for equipment has been revised to include off-road equipment for which either ARB or U.S. EPA have established mandatory and optional emission standards. Accordingly, all off-road diesel cycle engines at or above 50 hp could participate in the rule as soon as it becomes effective (January 1, 1996) even though the mandatory emission standards (for new engines) may go into effect in future years.

Comment #14-8 The load factor specified in the rule is extremely arbitrary. Fuel consumption is a much better method of determining load factor. When compared to the fuel consumption data provided by the manufacturer for 100 percent rated conditions, the load factor can be determined. Fuel consumption could be verified by fuel records or by flow meters.

Response #14-8 Staff concurs with the commentator's suggestion to utilize fuel consumption rates under actual operating conditions as well as at engine rated horsepower, provided by engine manufacturers, to determine the specific load factor. As part of the Off-Road MSERC application process, such information will be requested from the equipment operator. Rule language has been added accordingly.

Comment #14-9 The 0.5 g/bhp-hr step increment is too excessive and should change to a 0.1 or 0.2 g/bhp-hr increment.

Response #14-9 The commentator is referred to the response to comment #1-8.

Comment #14-10 A definition needs to be added into subdivision (b) for "load factor."

Response #14-10 A new definition for load factor is added under "Definitions" sections as follows. "Load Factor means the ratio of the engine power output during typical operating conditions to the engine rated horsepower."

Comment #14-11 Any emission testing required under the proposed rule, except where fraud or non-compliance is involved, should be at District expense.

Response #14-11 In-use compliance testing is not required under the proposed rule. However, in cases where the District requests testing to determine compliance with the optional emission standards, the testing will be at District's expense. Staff has also modified the proposed rule to include a requirement for emission testing of existing off-road engines which have been retrofitted to meet one of the optional emission standards without using certified conversion kits. Staff considers emission testing for these projects to be the obligation of the person seeking the credits. Emission testing of retrofitted equipment should be conducted in accordance with the ARB's test procedures for off-road equipment engines specified in Title 13, California Code of Regulations.

Comment #14-12 Clarify why projected operating hours are only for the subsequent six month period instead of a one year period.

Response #14-12 Staff believes that the projection of operating hours for the six month period provides a higher level of confidence than a one year period because the issuance of one year's worth of credit is based on six months of actual operating hours and six months of projected operating hours. Basing the credit calculation on one years' worth of projected operating hours results in less accuracy. Staff also examined basing the credit calculation on one years' worth of actual operating hours, but considered it a disincentive to the program and overly conservative.

Comment #15-1 The annual credit renewal process is too complex to provide an adequate incentive for operators to participate in program.

Response #15-1 In order for the District to adequately determine the continuing operation of the low- or zero-emission off-road equipment, and to issue appropriate credit amounts, it is necessary that yearly activity data (i.e., operating hours) be submitted to the District. The annual reporting of operating hours is also not expected to result in an administrative burden to equipment operators. As such, staff does not consider the annual renewal process to be too complex.

Comment #15-2 Amend the rule to allow banking of emission reduction credits. This would provide maximum flexibility for potential users.

Response #15-2 The commentator is referred to the response to comment #1-10.

Comment #15-3 Reevaluate the discounting of credits for zero-emission vehicles. No discounting is necessary for zero-emission vehicles since their emissions are always zero.

Response #15-3 The commentator is referred to the response to comment #1-11.

Comment #15-4 The widest possible use of credits to lower the cost of reductions and maximize the use of air quality resources is supported. As a result, limiting the use of MSERCs by precluding the removal of control equipment, and the use of non-compliant materials is opposed.

Response #15-4 Under the proposed rule, the District is allowing MSERCs to be used for meeting the emission reduction requirements of RECLAIM as well as Regulations XI, XIII, and XV rules. However, staff does not believe that allowing offsets for processes or equipment that are already complying with District emission requirements by installing control equipment or the use of compliant coatings would be, in general, cost-effective.

Comment #15-5 There is value to some limited grand-fathering in (to about the year 1990) by issuing credits for low- or zero-emission vehicles and equipment that have already been purchased.

Response #15-5 The commentator is referred to the response to comment #7-4.

Comment #15-6 The definition for "zero-emission equipment" in PR 1620 is too limited and the definition used for zero-emission vehicles in PR 1612 is preferred. Some large equipment might want to plug into the grid, and they would be precluded from doing this if the term "battery powered" is retained. In addition, flywheels, ultracapacitors, fuel cells (if they are zero g/bhp-hr) should qualify. The following definition is recommended: "ZEV means a vehicle powered solely by electricity (from sources such as batteries, flywheels, fuel cells, ultracapacitors, or direct connection to the power grid) which is certified to an optional emission standard of zero grams per mile."

Response #15-6 Staff agrees with commentator's suggestion and has revised the rule language to include any equipment which produces zero emissions of any criteria pollutants under any and all possible operational modes and conditions.

Comment #15-7 Why do diesel vehicles just receive NOx credits?

Response #15-7 The commentator is referred to the response to comment #4-1.

Comment #15-8 What is the useful life of a conversion kit?

Response #15-8 The useful life of any alternative fuel retrofit kit refers to the durability period (in hours) of the ARB certified conversion kit and is equivalent to the number of operating hours that the retrofitted engine is expected to meet one of the optional emission levels.

Comment #15-9 The definition of "useful life" is not clear on how equipment would be handled when retrofitted to be battery-powered.

Response #15-9 The definition for useful life only applies to alternative fuel conversions and not battery-powered retrofits. Based on discussions with industry, the District has considered conversions of off-road heavy-duty diesel equipment and utility service vehicles to be impractical and not cost-effective. Consequently, staff did not include provisions in the proposed rule to allow credits for retrofitting to battery-powered equipment or vehicles. However, in order not to preclude possible retrofits to battery-powered equipment from participating in the program and generating credits in the future, the proposed rule language has been revised to reflect this change.

Comment #15-10 Amend (c)(6) so that major engine overhauls meet the optional emission standard, instead of appearing to meet the baseline standard

Response #15-10 Staff agrees with your comment and the proposed rule language was revised to clarify this point.

Comment #15-11 How is load factor defined? Who determines it and how will it be enforced?

Response #15-11 Engine load factor is generally defined as the percentage of maximum power at which an engine is operated. Staff has revised the proposed rule language to include a definition for load factor as follows. "Load factor means the ratio of the engine's power output during typical operating conditions to the engine rated horsepower." Staff will rely on documentation from the equipment operators to determine the validity of specific load factors. The load factor will be provided by equipment operators and will be determined based on the fuel consumption rate at maximum rated horsepower (provided by engine manufacturers) and the fuel consumption rate under actual operating conditions.

Comment #15-12 In subparagraph (i)(3)(B), it is not clear how soon the operator must notify the Executive Officer of a major engine overhaul, engine replacement or vehicle retirement.

Response #15-12 Paragraph (c)(4) of the revised rule states that notification must be submitted within 90 days following retirement of the low- or zero-emission equipment or removal of the equipment from service for an engine replacement or a major engine overhaul.

Comment #15-13 Off-road vehicles should be entitled to evaporative and marketing emission credits as well.

Response #15-13 Staff has not included evaporative emissions in Proposed Rule 1620 because the ARB has not adopted any evaporative emission standards for the gasoline vehicles subject to the proposed rule (i.e., utility service vehicles). According to ARB, the benefits from evaporative emission control systems for these equipment and vehicles could not be quantified, and were not shown to be cost-effective. In addition, marketing emissions for gasoline vehicles subject to the proposed rule have not been quantified, but are expected to be small given the use and size of these vehicles.

Comment #15-14 Allow interpollutant trading, at least for NOx, VOC, and SOx.

Response #15-14 The commentator is referred to the response to comment #1-9.

Comment #15-15 Allow the use of MSERCs for all Regulation XI rules, not just the ones that allow them.

Response #15-15 In order to increase the flexibility of the credit program, staff has proposed that credits generated can be used to comply with Regulation XI rules which have future compliance dates. In this way, equipment operators who participate in the program could delay compliance with Source Specific Rules which have more stringent or technology forcing requirements. Allowing the use of MSERCs for all Regulation XI rules, regardless of whether they have future compliance dates or not, could result in the removal of add-on control equipment or the replacement of compliant with non-compliant materials, which is counterproductive to achieving air quality benefits. However, staff will continue to evaluate the use of MSERCs for additional Regulation XI rules.

Comment #15-16 Allow MSERCs to be used to comply with Regulation IV rules.

Response #15-16 The commentator is referred to the response to comment #11-1.

Comment #15-17 Allow MSERCs to be used to comply with U.S. EPA and ARB regulations.

Response #15-17 California and federal regulations for off-road sources impose requirements on engine manufacturers and thereby prohibit the sale of off-road equipment which have emission levels above the mandated standards. The District does not have the authority to allow credits generated under the proposed rule to be used for compliance with state and federal regulations as an alternative means of compliance. The primary intent behind the proposed rule is to provide flexibility for local facilities to comply with District rules, and issuing credits to manufacturers, who are often located outside the Basin would increase the cost of the credits, resulting in reduced flexibility.

Comment #15-18 We suggest limiting unnecessary recordkeeping.

Response #15-18 The commentator is referred to the response to comment #7-1.

Comment #15-19 Credit application deadlines should be extended beyond one month following the operation of low- or zero-emission equipment.

Response #15-19 Staff has modified the proposed rule to extend the deadline for submitting the MSERC Application from one month to 90 days following the operation of low- or zero-emission equipment.

Comment #17-1 By just reading the rule, how will someone know that they have to repower or retrofit with an engine that is 30 percent below the ARB emission standard for each specific class of engine?

Response #17-1 Staff has revised the proposed rule language to incorporate references to the baseline and optional emission standards which are contained in the ARB guidelines for off-road mobile source emission reduction credits.

Comment #17-2 Since ARB has not adopted optional emission standards, the District should ensure that the language in proposed rule is consistent with the final language of the yet to be adopted ARB guidelines, amending the rule language if necessary.

Response #17-2 Proposed Rule 1620 incorporates the ARB guidelines by reference. As such, the proposed rule will be consistent with any future revisions to the guidelines.

Comment #18-1 We recommend that language be added citing AQMD's authority to regulate mobile sources, and a general applicability section indicating what type of equipment is applicable to the proposed rule.

Response #18-1 Most District rules do not have an authority section, so for consistency, staff has not included one in the revised language. However, staff has revised the proposed rule to include an applicability section.

Comment #18-2 We suggest adding definitions (using ARB definitions when ever possible) for administering agency, decertification, emissions related parts, reporting and recordkeeping, and scheduled maintenance.

Response #18-2 The proposed rule currently contains 18 definitions, for clarification purposes and in response to input received from the public workshop, public consultation meeting, and additional written comments. In addition, staff has included definitions recommended by ARB. Several of the suggested additional definitions are considered requirements and are provided in other sections of the proposed rule.

Comment #18-3 The definition for major engine overhaul is weak and should be modified to include a definition for retrofit or rebuild which includes a specification that a major cylinder head be reconditioned or removed or replaced.

Response #18-3 The commentator is referred to the response to comment #5-1.

Comment #18-4 The definition for zero-emission equipment is unclear. Would fuel cell vehicles be included in this definition? ARB does not provide optional emission standards for zero-emission equipment.

Response #18-4 Staff has revised the definition for zero-emission equipment to mean any equipment which produces zero emissions of any criteria pollutant under any and all possible operational modes and conditions. Under this definition, equipment powered by fuel cells could be able to generate credits. It is not necessary that ARB establish optional emission standards for zero-emission mobile equipment since the proposed rule establishes the criteria that zero-emission off-road mobile equipment are assigned an optional emission standard of zero g/bhp-hr.

Comment #18-5 To guarantee credits are real, the proposed rule should require in-use compliance emission testing.

Response #18-5 The commentator is referred to the second paragraph of the response to comment #4-7.

Comment #18-6 The language in paragraph (d)(2) which states "the Application shall be deemed approved" is weak, and we suggest modifying it to read "the Application shall be deemed disapproved."

Response #18-6 Staff has removed the language from the proposed rule.

Comment #18-7 We recommend adding language to the Issuance of MSERCs subdivision to clarify that MSERCs may only be used for meeting RECLAIM, Regulation XI, and the offset requirements of Regulation XIII.

Response #18-7 Under the proposed rule, MSERCs may used to meet the emission reduction requirements of RECLAIM, Regulation XI rules which have future compliance dates, Regulation XV rules that allow the use of MSERCs, and as Regulation XIII (NSR) emission offsets. These and any other uses of MSERCs are specified in the revised rule subdivision (h). The commentator is also referred to the response to comment #9-2 on the issue of using MSERCs for compliance with Regulation XIII.

Comment #18-8 Banking of credits should not be allowed under the proposed rule since it is inconsistent with the goals of RECLAIM and jeopardizes attainment of the NAAQS for ozone.

Response #18-8 Proposed Rule 1620 specifies a two year life on MSERCs issued for the operation of low- or zero-emission equipment or the replacement of existing off-road equipment with non-polluting alternatives. The District does not believe that this provision will have any adverse effect on RECLAIM targets or ozone targets. The commentator is also referred to the response to comment #1-10.

Comment #18-9 The 1600 series rules as well as some of the Regulation XI series rules have not been federally approved, and therefore MSERCs used to meet Regulation XI rule requirements may not be federally enforceable.

Response #18-9 As with any other District rule, Proposed Rule 1620 will be submitted to the U.S. EPA for its approval. In the absence of federal approval, the District has the authority to enforce the provisions of the rule as provided under state law.

Comment #18-10 EPA supports the use of discount factors and will not approve the use of MSERCs which do not address the emission estimation uncertainty issue. In addition, there is no justification for reducing the discount factor when considering the use of MSERCs for NSR offsets.

Response #18-10 The commentator is referred to the response to comments #1-11 and #9-2 for discussions on discount factor and NSR offsets, respectively.

Comment #18-11 Proposed Rule 1620 should stay within ARB's guidelines for off-road mobile source emission reduction credits, which only allow credits for NOx. ARB has not adopted optional emission standards for utility service vehicles, and it is unclear how the MSERCs can be calculated.

Response #18-11 Regarding the issuance of NOx credits for off-road diesel equipment, the commentator is referred to the response to comment #4-1. For utility service vehicles, the amount of MSERCs will be calculated based on the difference between the baseline NOx, VOC, CO, and PM emission standards and an optional emission standard of zero g/bhp-hr. In the absence of optional emission standards for utility service vehicles specified in the ARB's guidelines, only zero-emission utility service vehicles (e.g., battery-powered) can qualify for generating credits. The baseline emission standards for utility service vehicles will be the California emission standards for the specialty vehicle category in the off-highway recreational vehicles and engine regulation. Since the mandatory standard for these engines is based on the combined NOx and VOC standard, the baseline used in calculating the MSERCs will be based on the certification emission values of new engines. Typically, 70% of the combined NOx/VOC emissions are attributable to VOC and 30% to NOx.

Comment #18-12 Clarify section (c)(1) so that it is clear that MSERCs can be generated for the purchase of low- or zero-emission equipment.

Response #18-12 Staff has revised the rule language to specify that equipment operators can implement several strategies for generating credits. Purchasing new low- or zero-emission equipment is included as one of these strategies.

Comment #18-13 Section (c)(4) does not explain how the equipment operator will verify the actual operating hours.

Response #18-13 Actual operating hours will be verified by installing a non-resettable hour-meter on each piece of low- or zero-emission equipment. The District will monitor the actual operating hours by reviewing the monthly data records of hours of operation, required under the proposed rule.

Comment #18-14 Section (e) needs to include a provision which requires demonstration of compliance with the optional emission standards throughout the credit life.

Response #18-14 Routine demonstration of compliance with the optional emission standards throughout the credit life is not required under the proposed rule because staff does not consider emission deterioration rates for diesel engines to be significant. However, for alternative-fueled engines, emission degradation is a greater concern due to uncertainties associated with their emission performance. Therefore, credits issued for alternative-fueled engines are limited to the ARB-certified useful life of the alternative-fuel conversion kit. The useful life of any alternative fuel retrofit kit refers to the durability period (in hours) of the ARB-certified conversion kit and is equivalent to the number of operating hours that the retrofitted engine is expected to meet one of the optional emission levels.

In-use emission testing of equipment participating in the program may be required in cases where the District suspects tampering or severe degradation. Such testing will be performed at designated emission test facilities at District's expense. Staff has also revised the proposed rule to include a requirement for emission testing of existing off-road engines which have been retrofitted to meet one of optional emission standards without using certified conversion kits. Staff considers emission testing for these projects to be the obligation of the person seeking the credits. Emission testing of retrofitted equipment should be conducted in accordance with the ARB's test procedures for off-road equipment engines specified in Title 13, California Code of Regulations.

Comment #18-15 MSERCs should be based on actual operating hours which can be verified. Too much of the proposed rule relies on good faith.

Response #18-15 During the first year, MSERCs are issued based on six months of actual operating hours and six months of projected operating hours. After the first year, the equipment operator is required to submit the actual operating hours for the previous twelve month period and project the operating hours for the subsequent six month period. Staff considers the enforceability of the proposed rule to be similar to any of the other District rules which require recordkeeping to verify compliance. The commentator is also referred to the response to comment #18-13.

Comment #20-1 Since ARB has not adopted optional emission standards, the District should ensure that the language in proposed rule is consistent with the final language of the yet to be adopted ARB guidelines, amending the rule language if necessary.

Response #20-1 The commentator is referred to the response to comment #17-2.

SUMMARY AND DRAFT FINDINGS

Summary

Rule 1620 is part of the District's strategy to attain federal and state ambient air quality standards. Long-term air quality benefits are expected by attaining and maintaining the ambient air quality standards for ozone. Improved air quality will ultimately reduce negative public health impacts from this criteria pollutant.

Proposed Rule 1620 is technologically feasible and cost-effective, while reducing ROC, NOx, CO, PM, and SOx, and the rule addresses concerns raised by the public, wherever possible. Therefore, staff recommends the adoption of Rule 1620.

These findings are being made in compliance with state law requirements.

Draft Findings Required by the California Health and Safety Code

Health and Safety Code Section 40727 requires the District to adopt written findings of necessity, authority, clarity, consistency, non-duplication and reference.

Necessity - As set forth in the adopted Air Quality Management Plan (AQMP), the emission reductions associated with Proposed Rule 1620 are needed for the following reason:

a) State and federal health-based ambient air quality standards for ozone are regularly and significantly violated in the South Coast Air Basin. The extensive reduction of ROC and NOx emissions (precursors to ozone formation) CO, and PM, including the reductions from Proposed Rule 1620 is needed to meet federal and state air quality standards.

b) By exceeding state and federal air quality standards, the health of people within the South Coast Air Basin is impaired.

c) By exceeding state and federal air quality standards, the quality of life is reduced in the South Coast Air Basin in numerous respects.

d) The "California Clean Air Act" (CH&SC Section 40910 et seq.) requires that the District make every effort to attain federal and state ambient air quality standards as soon as practicable. Proposed Rule 1620 makes progress toward that goal.

e) Proposed Rule 1620 is intended to provide an alternative means of compliance with District regulations.

Authority - The District Board obtains its authority to adopt, amend, or repeal rules and regulation from Health & Safety Code Sections 40000, 40001, 40440, 40441, 40463, 40702, 40725 through 40728, and 40910 through 40920.

Clarity - The District Board determines that Proposed Rule 1620 is written or displayed so that its meaning can be easily understood by persons directly affected by it.

Consistency - The District Board determines that Proposed Rule 1620 is in harmony with, and not in conflict with or contradictory to, existing federal or state statutes, court decisions, or regulations.

Non-Duplication - Proposed Rule 1620 does not impose the same requirements as any existing state of federal regulation and are necessary and proper to execute the powers and duties granted to, and imposed upon, the District.

Reference - In adopting this proposed rule, the Board references the following statutes which the District hereby implements, interprets or makes specific: H&S Code Sections 40001 (rules to achieve ambient air quality standards), 40440(a) (rules to carry out AQMP).

REFERENCES

Acurex Environmental Corporation. Alternative-Fueled Truck Demonstration: The Methanol Program Final Report. December 1992.

California Air Resources Board (CARB). Notice of Public Meeting to Consider the Adoption of Regulations Regarding the California Exhaust Emission Standards and Test Procedures for New 1996 and Later Heavy-Duty Off-Road Diesel Cycle Engines and Equipment Engines, Mail-Out #91-51. April 1991.

California Air Resources Board (CARB). Notice of Public Hearing to Consider the Adoption of Emission Control Regulations for Off-Highway. Recreational Vehicles and Engines, Mail-Out #93-54. November 1993.

California Air Resources Board (CARB). Guidelines for the Generation and Use of Mobile Source Emission Reduction Credits. February 1994.

California Air Resources Board (CARB). Generation of Emission Reduction Credits Through the Conversion of Off-Road Diesel Cycle Engines at or Above 50 Horsepower to Low-Emission Configurations. January 1995.

California Code of Regulations (CCR). Title 13. Chapter 11. Article 2. Section 2423. Exhaust Emission Standards & Test Procedures - Heavy-Duty Off-Road Diesel Cycle Equipment.

Lowrey, John S. 3M Industrial Mineral Products Division. Personal communication with Zorik Pirveysian. June 1995.

Merrian, Dave. Detroit Diesel Corporation. Personal communication with Edward Eckerle. April 1995.

SAE Technical Paper Series, A Neat Methanol Direct Injection Combustion System for Heavy-Duty Applications. September 1986.

South Coast Air Quality Management District (SCAQMD), Appendix III-A, Final 1994 AQMP. September 1994.

SouthWest Research Institute (SWRI). Application of On-Highway Emissions Reductions Technology to An Off-Highway Engine. November 1991.

Sneller, Milton. Taylor Dunn. Personal communication with Zorik Pirveysian. April 1995.

U.S. Environmental Protection Agency. Nonroad Engine and Vehicle Emission Study - Report. November 1991.

White, Glen J. Valley Detroit Diesel Allison. Personal communication with Zorik Pirveysian and Edward Eckerle. June 1995.