South Coast Air Quality Management District

Execute Contract to Cosponsor Development of Very Low-NO_x Heavy-Duty Natural Gas Engine

SYNOPSIS:

On July 21, 2000, the Board approved execution of a cost-shared contract for $1,330,996 with Detroit Diesel Corporation (DDC) to develop a very low NO_x heavy-duty natural-gas engine, funded with $830,966 from the Clean Fuels Fund and $500,000 from the CEC. CEC's contract was not executed until February 2001, thereby delaying the DDC contract. DDC has indicated an additional $500,000 is needed to expand the reliability testing and accelerate the commercialization schedule. This action is to recognize an additional $300,000 in co-funding from ARB and CEC, and an additional $200,000 from AQMD's Clean Fuel Funds. Funding will be incorporated into the contract between DDC and AQMD, resulting in a total contract of $1,830,996. DDC's cost-share is $1,627,184.

COMMITTEE:

Technology, March 23, 2001, Recommended for Approval

RECOMMENDED ACTION:

1. Recognize $100,000 in revenue from the California Air Resources Board (CARB) to the General Fund and authorize the Chairman to execute an agreement with the CARB to co-fund the DDC project.
   
   
2. Recognize $200,000 in revenue from the California Energy Commission (CEC) to the General Fund and authorize the Chairman to execute an agreement with the CEC to co-fund the DDC project.
   
   
3. Recognize $500,000 in revenue from the CEC to the General Fund (agreement executed in February 2001).
   
   
4. Appropriate $800,000 from the Undesignated Fund Balance in the General Fund to the FY 2000-01 Services and Supplies Major Object, Professional and Special Services Account in the Science and Technology Advancement Budget.
   
   
5. Appropriate $1,030,966 from the Clean Fuels Fund to the FY 2000-01 Services and Supplies Major Object, Professional and Special Services Account in the Science and Technology Advancement Budget.
   
   
6. Authorize the Chairman to execute a contract with Detroit Diesel Corporation to develop a very low-NOx heavy-duty natural gas engine in an amount not to exceed $1,830,966 upon receipt of co-funding from CEC and ARB.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

On July 21, 2000, the Governing Board approved execution of a contract with Detroit Diesel Corporation (DDC) to develop a very low NO_x heavy-duty natural gas engine. This was in response to AQMD’s RFP #9900-11. This contract for $1,330,996 was to be funded with $830,966 from the Clean Fuels Fund and $500,000 from the CEC. The contract with CEC was not executed until February 2001. At the time of the CEC contract negotiations, Daimler Chrysler Corporation purchased DDC. After its review of the proposed project and proposed contract with the AQMD, two major changes were requested for continuation of the proposed project. First, the introduction date of the developed engine would need to be advanced from March 2003 to October 2002. This new date would coincide with the introduction of DDC’s diesel engines and make the natural gas engine part of DDC’s standard assortment of engines. Second, the projected reliability of the developed low-emission natural gas engine would need to be improved with additional durability testing. This project augmentation would cost an additional $500,000 from the co-funders.

AQMD staff approached the original partners [USDOE National Renewable Energy Laboratory (NREL) and the California Energy Commission (CEC)] on RFP #9900-11 to review the augmentation proposal and to request additional funding. NREL agreed that the augmentation was reasonable and would result in an improved commercial product. However, NREL did not have any uncommitted funding available for this project. Similarly, the CEC indicated that the augmentation would be valuable, but the CEC’s only available funding source was their Program Opportunity Notice for the Carl Moyer Heavy-Duty NO_x Advanced Technology Development Program. Consequently, the AQMD staff submitted a proposal for augmentation funding of $200,000 from the CEC. Finally, the AQMD approached the staff of the ARB to share the additional cost for the augmentation of this very low NO_x engine. ARB staff agreed to provide $100,000 out of their existing budget for the augmentation of the DDC project. DDC also agreed to increase their cost sharing by $140,801: from $1,486,383 to $1,627,184.

Proposal

DDC has proposed to augment the very low-NO_x heavy-duty natural gas engine project in order to speed up its introduction by five months and improve engine reliability. This augmentation involves increasing the number of durability engines and demonstration test vehicles. Engineering staff from the AQMD, ARB, CEC and NREL have reviewed this augmentation proposal and agree that product reliability will be substantially enhanced. The augmented project is summarized in the following table.
 

Benefits to AQMD

The proposed project is included in the March 2001 update of the Technology Advancement Plan under Project 2001CFM2-2, "Development and Demonstration of Low Emission, Alternative Fuel Engine Technologies for On-Road Applications." The AQMP relies on the expedited implementation of advanced technologies in Southern California to achieve air quality standards.

AQMD’s Clean Fuels Program has supported the development and demonstration of low emission, alternative fuel heavy-duty engines. This support has directly led to the low emission certification of alternative fuel heavy-duty engines. Commercialization of a 0.5 g/bhp-hr NO_x natural gas engine in advance of ARB and EPA requirements will enhance the AQMD’s efforts to reduce emissions from the heavy-duty vehicle sector. A transit bus operating 40,000 miles/year with a 0.5 g/bhp-hr engine would produce 0.38 ton less NOx than operating on a 2.5 g/bhp-hr engine, and 0.66 ton less than operating on a 4.0 g/bhp-hr engine. Also, the introduction of this engine five months early through the project augmentation will result in an indeterminate early NO_x reduction benefit.

Resource Impacts

Total cost for the proposed contract is $3,458,150. AQMD’s contribution from the Clean Fuels Fund shall not exceed $1,030,966 in addition to $500,000 in co-funding already received from the CEC, $200,000 in co-funding expected from the CEC, and $100,000 in co-funding expected from the ARB. The total estimated cost-share for the previously authorized project and this current proposed project is:
 

Sufficient AQMD funds have been made available in the General Fund through transfer from the Clean Fuels Fund, which is established as special revenue from the state-mandated Clean Fuels Program. The Clean Fuels Program, under Health and Safety Code Sections 40448.5 and 40512 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile sources to support projects to increase the utilization of clean fuels, including the development of the necessary advanced enabling technologies. Funds collected from motor vehicles are restricted, by statute, to be used for projects and program activities related to mobile sources that support the objectives of the Clean Fuels Program.

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