BOARD MEETING DATE: June 3, 2005 AGENDA NO. 4

The majority of heavy-duty vehicles operating in the South Coast Air 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 support the use of alternative fuels, including low-emission natural-gas vehicles.

In keeping with this strategy, the Board previously provided cofunding with the U.S. Department of Energy, National Renewable Energy Laboratory (DOE/NREL) for the "Next Generation of Natural Gas Vehicles" (NGNGV) program. The goals of this program are to develop new medium-duty and heavy-duty natural gas engines vehicles for commercialization starting in 2004 that are cost-competitive with diesel vehicle counterparts. This program has resulted in successful commercialization of low-emitting natural gas engines into the marketplace for a variety of uses including transit buses, refuse haulers, pick-up and delivery trucks, as well as municipal and utility fleets. Some studies conducted by NREL actually show an overall increase in fuel economy and decrease in operational costs for John Deere natural gas engine-powered vehicles, when compared to their diesel counterparts.

In addition, the AQMD has a long-standing commitment to provide clean transportation for school children in the South Coast Air Basin. John Deere is the leading natural gas engine manufacturer providing a clean fuel technology alternative for the type D school bus application, which seats 84 students. The proposed project will commercialize the next generation natural gas engine for these buses, which has the potential to affect approximately 2,500 diesel school buses currently operating in the South Coast Air Basin.

John Deere Power Systems, Inc. (Deere) proposes to develop and field test advanced technologies and methods for controlling exhaust emissions while improving thermal efficiency in a natural gas engine. The last phase of the proposal includes emission certification and commercialization to meet the 2010 new on-road engine NOx emission standards by 2007. The Series 450 8.1L is a proven powerplant for refuse trucks, school, and transit buses. The current proposal includes increasing the displacement to 9L, natural gas stochiometric engine with exhaust gas recirculation that will be configured for 250 hp to 325 hp, with a torque target from 800 lb-ft to 1,000 lb-ft., depending on need. Specifically, Deere will conduct a design and development program, followed by a durability and life-testing analysis, field testing in a controlled fleet, and engine exhaust emission analysis. A full fleet demonstration program will be developed over the next year to assess actual in-use performance. Deere plans to have the engine commercially available by the first quarter of 2007, well ahead of the 2010 requirements. The recommended action is to award a sole-source contract to Deere at a cost not to exceed $695,400 from the Clean Fuels Fund to develop and certify a medium/heavy-duty natural gas engine meeting 2010 standards.

In the "Procurement Policy and Procedure" document, Section VIII outlines the provisions for awarding a sole source contract. Specifically, under subdivision B. 2. c, namely (1) "The unique experience and capabilities of the proposed contractor or contractor team". In order to promote the availability of clean technologies, the AQMD regularly supports the development and commercialization of alternative technologies including natural gas engines, especially through the NREL Next Generation Natural Gas Vehicle program. Currently, there are only two natural gas engine manufacturers for this class size: Cummins-Westport and John Deere. The DOE and AQMD are co-funding Cummins-Westport to develop a 2010 compliant engine (May 6, 2005 Board Meeting). This project would support the only other natural gas engine manufacturer, as well as the leading natural gas school bus engine manufacturer for Type D school buses, to develop an engine meeting the 2010 new on-road engine NOx emission standard by 2007. Also, subdivision B.2.d(1) provides that contracts may be sole-sourced for projects involving cost sharing by multiple sponsors. This project meets that criterion.

The Clean Fuels Program 2005 Plan Update includes the project Develop and Demonstrate Advanced Alternative Fuel Heavy-Duty and Medium-Duty Engines and Vehicles, allocating additional research funds for a 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" as well as supports the 2003 AQMP Mobile Sources Control Measure, On-road Heavy-Duty-3, "Pursue Approaches to Cleanup the Existing and New Truck/Bus Fleet." This project is intended to expedite the commercialization of low-emission alternative fuel heavy-duty engine technology in California.

The AQMD has been extremely proactive in developing and demonstrating low-emission, medium and heavy duty, natural gas vehicles. These projects will provide better air quality by reducing the NO_x and particulate emissions from these vehicles, while also reducing the CO₂ greenhouse gas emission from heavy-duty engines for model year 2007-2009 diesel engines, which will more than likely be certified to 1.2 g/bhp-hr for NOx.

The total amount of AQMD funding for this program shall not exceed $695,400 from the Clean Fuels Fund, with the remainder of the total $6,582,900 project costs being provided by Deere and other potential funding partners. Deere anticipates funding from other entities, such as DOE, to support efforts scheduled for mid- to late-2006. AQMD funding would assist in the early efforts to develop and demonstrate the engine, scheduled for the latter part of 2005 and early 2006. The proposed breakdown is shown in the following table:

Partners	Cost Sharing	Percentage
Deere	$3,260,000	49.5
SCAQMD	$695,400	10.5
Other Partners	$2,627,500	40
Total	$6,582,900	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.