BOARD MEETING DATE: March 1, 2002
AGENDA NO. 43

Adopt Update of Technology Advancement Plan for Clean Fuels Program and Approve Technology Advancement Annual Report

SYNOPSIS: 

SB 98 (Alarcon) amended and extended the Clean Fuels Program until January 1, 2005. Amendments under Health & Safety Code Section 40448.5.1 require the submittal of an Annual Report covering the past year’s Clean Fuels Program activities to the Legislative Analyst and air quality committees of the State Legislature by March 31, following Board approval. The law also requires the Board to adopt the Technology Advancement Plan for the current year. These documents have been accordingly prepared, reviewed and approved by the state-mandated Clean Fuels Advisory Group, and submitted for Board approval.

COMMITTEE: 

Technology, January 25, 2002, Recommended for Approval

RECOMMENDED ACTION:

Approve the attached Resolution:

1. Finding that the update of the Technology Advancement Plan and its proposed projects do not duplicate any past or present programs of specified organizations;
   
    
2. Adopting the Technology Advancement Plan: 2002 Update, and include it in the AQMD’s Clean Fuels Program; and
   
    
3. Approving the Technology Advancement Office Annual Report: 2001, for the Clean Fuels Program.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Achieving federal and state clean air standards in Southern California will require emission reductions from both mobile and stationary sources beyond those available from current technologies. The AQMP relies on the expedited, future implementation of cleaner-burning fuels and advanced technologies in Southern California to achieve these standards. To meet the needs of the AQMP for progressively lower-emitting fuels and technologies, the AQMD adopted a Clean Fuels Program in 1988 and established the Technology Advancement Office to administer the program. Concurrently, the State Legislature authorized funds for the AQMD’s Clean Fuels Program via SB 2297 and subsequently renewed this funding authorization via SB 316 in 1993. On June 8, 1999, SB 98 (Alarcon) was signed by Governor Davis into state law, which extended the Clean Fuels Program funding mechanism until January 1, 2005, added administrative requirements, and specified the creation of and expectations for the Clean Fuels Advisory Group.

The objectives defined for the Clean Fuels Program in California Health & Safety Code (H&SC) Section 40448.5 are:

"(a) The South Coast district shall establish an Office of Technology Advancement to administer the clean-burning fuels program established pursuant to this section. The program shall encourage projects that increase the utilization of clean-burning fuels that reduce public health hazards from air pollution."

"(d) In developing its program, the south coast district shall consider promoting projects in the transportation and stationary source sectors utilizing methanol fuel, fuel cells, liquid petroleum gas, natural gas, including compressed natural gas, combination fuels, synthetic fuels, electricity, including electric vehicles, and other clean-burning fuels."

The AQMD Clean Fuels Program is implemented as a public-private partnership in conjunction with private industry, technology developers, academic institutions, research institutions, and government agencies. This public-private partnership has enabled the AQMD to leverage its public funds with outside investment in a ratio of more than $4 of outside funding to every $1 of AQMD funding.

H&SC Section 40448.5.1 requires that the AQMD adopt a plan that describes the expected cost and benefits of proposed projects prior to any Clean Fuels Program expenditure after January 1, 1996 and find that the proposed projects do not duplicate programs of specified organizations. The Board initially adopted such a plan at its March 8, 1996 meeting. SB 98 amended this provision by requiring annual updates to this plan and 30-day public notice to specified interested parties and the public prior to the annual public hearing at which the Board takes action on the Clean Fuels Program.

SB 98 also requires the preparation of an annual report with specified contents. This annual report must be reviewed by an advisory group and the results of such consultation provided to the Board, prior to the Board's approval and the final submittal of the annual report to the Legislative Analyst and to specified offices of the Legislature by March 31 of each year. This legislation also specifies the make-up of this advisory group and its primary responsibilities to make recommendations regarding the most cost-effective projects that advance and implement clean fuels technology and improve public health. The Board previously approved the membership of this advisory group on September 10, 1999. Changes to the composition will be reviewed by the Technology Committee and submitted to the Board for approval on an as-needed basis.

Proposal

The attached Update to the Technology Advancement Plan for the Clean Fuels Program is the seventh submittal of the required plan. This update identifies potential project areas to be funded during 2002. The proposed projects reflect new promising low- and zero-emission technologies and applications that have emerged since the initial submittal. The 2002 update includes a number of proposed project areas, not all of which are expected to be funded in the current fiscal year given the available budget, staff resources, and suitability of potential projects. Projects not funded in 2002 may be considered for funding in subsequent years. There is no requirement to expend all of the allocated monies in any specific area within this year.

In addition to identifying proposed projects to be considered for funding, this Update establishes six key technical areas of highest priority to the AQMD. Those high priority areas include:

• Fuel cells for transportation and power generation
• Diesel alternatives
• Electric and hybrid electric technologies
• Off-road applications of alternative fuel technologies
• Infrastructure development
• VOC reduction technologies for stationary sources

These technical priorities will necessarily be balanced by funding availability and the availability of qualified projects. Revenues from several sources support the AQMD's Technology Advancement program. The principal revenue source is the Clean Fuels Program, which, under H&SC Section 40448.5 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile and stationary sources to support the program’s objectives, albeit with constraints on the use of the funds. The Clean Fuels Program funding legislation is currently due to sunset on January 1, 2005.

The ARB has established the Carl Moyer Memorial Air Quality Standards Attainment Program to provide incentives to replace or retrofit higher-polluting diesel vehicles, off-road vehicles and equipment, as well as infrastructure support. Matching funds are required from local air districts such as the AQMD in order to receive state funding and administer the program locally. In addition the Governor has also provided state funds to support the replacement of older, highly polluting school buses in California. Local funds are again required to receive the state funding and implement the school bus replacement program locally. The Plan includes a provision to provide such matching funds to implement these important incentives programs. Furthermore, due to uncertainty with regard to state funding allocations, the Plan allows for the Board to execute the option to transfer funds up to an additional $10,000,000 from other project areas into the Alternative Fuel Technologies - Incentive area, in the Clean Fuels Program.

Grants and cost-sharing revenue contracts from various government agencies, such as the ARB, CEC and DOE, also support technology advancement efforts. Another potential source to fund the development and demonstration of advanced clean air technologies is the Advanced Technology Fund. This fund was established primarily as a special revenue fund for revenues received by the AQMD as a result of fines, penalties, and settlements from violations of applicable air pollution control rules or laws.

Although not required by legislation, but in an attempt for completeness, the proposed Update to the Technology Advancement Plan includes some projects that may be funded by revenue sources other than the Clean Fuels Program. For example, there are several proposed projects that address the development of technologies that would reduce VOC and PM emissions from various stationary source applications. These projects are essentially efforts designed to specifically address the technology advancement needs related to Federal Clean Air Act Section 182(e)(5), as mentioned in the 1997 AQMP Revision.

Not all projects identified in this plan are expected to be recommended for funding. Projects in the plan that are deemed ready will be presented individually to the Board for review and approval. At that time, additional details will be provided about the technology to be demonstrated, the intended application, the specific scope of work, the capabilities of the contractor and project team being recommended, and how the project will be cost-shared by various parties.

The proposed update is the result of a comprehensive planning and review process. This process has included consideration of AQMP control measures and coordination activities involving outside organizations. This update has been reviewed by the Technology Advancement Advisory Group, a panel of key stakeholders, and the SB 98 Clean Fuels Advisory Group, an external panel of experts, listed in the Appendix to the Update. Based on communications with the organizations specified in H&SC Section 40448.5.1 and review of their programs, the project areas proposed in this update do not appear to duplicate any past or present projects. As each individual project is recommended to the Board for funding, staff will continue to coordinate with these organizations to avoid duplication and ensure optimal expenditure of Clean Fuels Program funds.

Also attached is the Technology Advancement Office Annual Report, covering projects and progress of the program for calendar year 2001. This report addresses all of the requirements specified in H&SC Section 40448.5.1(d), as amended by SB 98. Specifically, the report includes:

• A description of the core technologies that the AQMD considers critical to ensure attainment and maintenance of ambient air quality standards and a description of the efforts made to overcome barriers to commercialization of those technologies;
  
   
• An analysis of the impact of the AQMD’s Clean Fuels Program on the private sector and on research, development, and commercialization efforts by major automobile and energy firms, as determined by the AQMD;
  
   
• A description of projects funded by the AQMD, including a list of recipients, subcontractors, co-funders, matching state or federal funds, and expected and actual results of each project advancing and implementing clean fuels technology and improving public health;
  
   
• The title and purpose of all projects undertaken pursuant to the Clean Fuels Program, the names of the contractors and subcontractors involved in each project, and the amount of money expended for each project;
  
   
• A summary of the progress made toward the goals of the Clean Fuels Program; and
  
   
• Funding priorities identified for the next year and relevant audit information for previous, current, and future years covered by the report.

As required, staff has consulted with the SB 98 Clean Fuels Advisory Group which has approved the annual report.

Attachments

• Resolution
• Technology Advancement Plan for the Clean Fuels Program: 2002 Update
• Technology Advancement Office Annual Report: 2001

Due to the size of the Annual Report, the Appendix C Final Report portion will not be available electronically. It is available by hard copy only from the Technology Advancement Office.

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