August 11, 1995

South Coast Air Quality

Management District Board

Background

Operation of alternative fuel vehicles (AFV) is almost exclusively by government and private fleets, with only a handful operated by private citizens. However, to make a large market penetration and significantly affect the vehicle emissions inventory, the general public must become aware of AFVs and these vehicles must become available in the secondary marketplace.

The rental car industry purchases large numbers of new vehicles annually, has an accelerated vehicle fleet turnover, and provides a stable supply for the used car market. These cars are rented by government employees, large corporations and the private consumer. Rental car fleets have been very reticent to incorporate AFVs into their operations because of concerns regarding potential customer resistance, fuel availability, vehicle reliability, model availability, additional operating and capital costs, and other factors.

In April 1994, the AQMD entered into an agreement with The Hertz Corporation to demonstrate methanol fuel flexible vehicles (FFV) at four Basin airports -- Los Angeles International (LAX), Orange County, Ontario, and Burbank. As part of this agreement, Hertz agreed to purchase and operate up to 1,000 FFVs at the four airports, and the AQMD agreed to assist Hertz with the establishment of methanol fueling facilities at each airport. Hertz has operated approximately 1,000 Ford Taurus and Chrysler Intrepid FFVs out of LAX, Orange County and Burbank airports, and continues to purchase FFVs. However, they have been unable to implement the program at the Ontario Airport. Airport authorities will not allow installation of additional fueling facilities at the airport because of anticipated major airport reconstruction. Hertz officials have suggested the Palm Springs airport as a substitute site.

In December 1993, the Board recognized funds from the California Energy Commission (CEC) to establish methanol refueling stations in Southern California and placed those funds in the Technology Advancement Special Revenue Fund. Staff has aggressively pursued a number of options to utilize these monies to establish M85 fueling stations in the Basin. The major oil companies, all of whom have existing agreements for the establishment of M85 stations, have declined to establish additional stations. District staff, with the assistance of the CEC, entered into lengthy negotiations with Thrifty Oil Company to establish M85 refueling at Thrifty stations. Those negotiations ended after approximately 18 months, with Thrifty declining to enter into an agreement. A Program Opportunity Notice was issued, soliciting interest from local governments, school districts, independent oil companies, and existing fleet owners of FFVs. To date, only two potential sites have been identified. Pursuit of other possible options has ended because the CEC must be invoiced for any expenses related to these funds before September 30, 1995.

Because of the success of the Hertz AFV rental car program, and the likely penetration of these vehicles in the secondary market after Hertz use, the CEC has requested that $100,000 of CEC funds be directed to Hertz to enable expansion of the rental car fleet network to San Diego.

Proposal

Staff proposes to amend the existing agreement with The Hertz Corporation to accomplish the following:

_ Substitute the Hertz location at Palm Springs airport for Ontario airport.

_ Augment the total contract amount by $100,000 from the Technology Advancement Special Revenue Fund, making the total contract amount $500,000.

_ Install a methanol fueling facility at the Hertz San Diego airport location.

Financial Terms

Staff recommends that the AQMD amend the existing agreement with The Hertz Corporation in an amount not to exceed $100,000 to expand the demonstration of AFVs in rental car fleets to San Diego.

Sufficient funds are available in the Technology Advancement Special Revenue Fund to fund this project. This recommendation was approved by the Technology Committee July 12, 1995.

NOW THEREFORE IT IS RECOMMENDED THAT YOUR BOARD

--Authorize the Chairman to amend the existing agreement with The Hertz Corporation as follows:

Substitute the proposed methanol refueling site at the Ontario Airport with a methanol refueling site at the Palm Springs Airport.

Augment the contract amount by a total of $100,000 from the Technology Advancement Special Revenue Fund.

Establish a methanol refueling site at the Hertz location in San Diego.

Respectfully,

James M. Lents, Ph.D.
Executive Officer

ACL:ARA:CS