BOARD MEETING DATE: December 3, 2004 AGENDA NO. 7

The majority of Class 8 heavy-duty vehicles in the South Coast basin are powered by diesel engines that contribute significant emissions of NO_x and particulate matter. The AQMD has long recognized the adverse air quality and health impacts of diesel exhaust and has adopted several measures to promote the use of low-emission natural-gas vehicles. In addition, the Carl Moyer Program provides incentive funding for such engines if they meet optional NOx emission standards. Heavy heavy-duty (HHD) engines, rated at greater than 400 hp, are often used in waste transfer from collection sites to landfills, as well as other applications such as bulk haul, regional distribution and fuel delivery. Over the past year, the two leading companies producing alternative fueled HHD engines decided not to commercialize their alternative fuel HHD engine products citing lack of business. For nonattainment areas, there is an air quality need to have alternative fuel technologies for HHD engines advanced to provide an alternative fuel choice for Class 8 vehicle applications.

Another factor in the lack of alternative fuel engines in this class is the pending U.S. EPA and CARB standards, and the fact that there are only a few natural gas engine manufacturers. The U.S. EPA and CARB heavy-duty emissions standards require NO_x and PM emissions of 0.2 g/bhp-hr and 0.01 g/bhp-hr, respectively, in 2010. These emission standards phase in starting in 2007 but also allow engine manufacturers to meet a less stringent fleet average standard of 1.2 g/bhp NO_x. To meet the 2007 NO_x and PM standards, heavy-duty diesel engine manufacturers are considering a variety of technologies, including complicated and high-maintenance exhaust after-treatment systems. Some engine manufacturers, however, are working on technology using natural gas that enables compliance with the 2007 standards without such after-treatment. One such technology, the high pressure direct ignition (HPDI) technology, is unique because it uses natural gas in a diesel cycle to maintain the diesel-like attributes of high performance and efficiency while reducing NO_x and PM emissions. For HPDI engines, approximately 95% of diesel consumed in a diesel heavy-duty truck is displaced with LNG.

The AQMD received an unsolicited proposal from Westport Research, Inc. to develop the HPDI engine further to meet 2007 emissions standards, with a progression toward meeting the 2010 standards. Westport Research, Inc. indicated that they have received co-funding from the U.S. DOE National Renewable Energy Laboratory (NREL) and Pacific, Gas and Electric. Westport Research, Inc. is requesting the AQMD’s participation in the project.

The project proposal covered in this recommendation is for Phase 1 of a three-phase program, with the overall goal to develop and demonstrate an engine that meets the 0.2 g/bhp-hr NO_x emissions standard requirements before 2010. Phase 1 includes a development and validation of the HPDI technology, including an evaluation of initial industry compatibility and acceptance. This will occur through partnering with agencies, industry, and customers to demonstrate a number of LNG Class 8 HPDI trucks meeting 2007 emissions levels (1.2 g/bhp-hr NOx) in California and Canadian customer fleets. Phase 2 includes additional work on the Phase 1 core technology to evaluate and develop potential combustion solutions for the 0.2g/bhp-hr NO_x standard required in 2010. To support long-term product viability, the overall system architecture, design, and supplier strategy would be reviewed in parallel to reduce the expected cost premium of the HPDI system. As with Phase 1, customer fleet demonstrations of 0.2g/bhp-hr NO_x technology would be used to validate in-use performance and assist with creating commercial demand and infrastructure support. Phase 3 is intended to be the final phase of product development covering manufacturing preparation and production readiness of 0.2g/bhp-hr NO_x compliant LNG engines for Class 8 trucks well in advance of the 2010 timeline.

Staff is requesting the Board’s approval to award a sole-source contract to Westport Research, Inc. to conduct Phase 1 of the proposal to develop a heavy heavy-duty natural gas engine for Class 8 vehicles that meets 2007 emission standards at a cost not to exceed $1,944,911 from the Clean Fuels Fund, with total project costs of $5,583,426. Co-funding is also being provided by the U.S. DOE’s NREL and Pacific Gas and Electric, with fleet demonstrations to occur in Canada and Northern California. Westport Research, Inc. is currently working on identifying a fleet in the South Coast Air Basin that could also participate in this demonstration. Staff will bring a proposal for the demonstration element of this project to the Board at a later date. Specifically, AQMD co-funding will assist Westport Research, Inc. to validate the core technology and assist in future customer prototype demonstrations of emissions control technology that delivers 1.2 g/bhp-hr NO_x and 0.01 g/bhp-hr PM for a 15L, 450 horsepower, 1,250 ft-lb torque, natural gas ISX-G heavy-duty engine. The development covers combustion, electronic controls, natural gas fuel system development and vehicle integration, leading to the eventual demonstration of the 1.2g/bhp-hr NO_x, HPDI technology in a fleet of approximately 10 to 20 Class 8 trucks with end users. This demonstration is expected to start in 2005 for a period of up to 5 years, with up to half of those trucks operating within the South Coast air district. The longer-term plan includes the option to repower the converted trucks with an engine that meets the 0.2 g/bhp-hr standard for NO_x.

In the "Procurement Policy and Procedure" document, Section VIII outlines the provisions for awarding a sole source contract. Specifically, under item B. 2.d, "Other circumstances exist which in the determination of the Executive Officer require such waiver in the best interests of the AQMD," namely (1) "Projects involving cost sharing by multiple sponsors".

The development and validation portions of this Phase 1 project includes an estimated cost sharing of 35% from the AQMD and the remaining 65% from other project partners, including Westport Research, Inc.

The Clean Fuels Program 2004 Plan Update sets aside money to Develop and Demonstrate Advanced Alternative Fuel Heavy-Duty and Medium-Duty Engines and Vehicles, which allocates additional research funds for a heavy heavy-duty engine. Furthermore, the proposed project is included in the June 7, 2002 Advanced Air Pollution Research Plan under item D-1 "Demonstrate Vehicles with Advanced CNG/LNG Engines. The proposed project also supports the 2003 AQMP Mobile Sources Control Measure, On-road Heavy-Duty-3, "Pursue Approaches to Clean-up the Existing and New Truck/Bus Fleet." This project is intended to expedite the commercialization of low emission alternative fuel heavy heavy-duty engine technology in California, both in the Basin and in intrastate operation. By working cooperatively with other local air districts and CARB, the SCAQMD can leverage its funds and provide a statewide air quality benefit.

The AQMD has been extremely proactive in developing and demonstrating low emission, medium and heavy duty, natural gas vehicles. These projects will help provide better air quality by reducing the NO_x and particulate emissions from these vehicles, while also reducing CO₂ greenhouse gas emissions.

The total amount of AQMD funding for this program shall not exceed $1,944,911. Staff proposes to cost-share the HPDI engine development and validation project, with the remaining funds as summarized in the table below:

Phase 1 Total Contributions
Partners	Total	%
Westport Research, Inc. Sustainable Technology & Development Canada	$2,320,612	41.6
DOE/NREL	$1,058,803	19
Pacific Gas & Electric	$259,100	4.6
SCAQMD	$1,944,911	34.8
Total	$5,583,426	100

Sufficient funds are available from the Clean Fuels Fund, established as a special revenue fund resulting 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.