BOARD MEETING DATE: April 7, 2006
AGENDA NO. 8

Amend Contracts to Develop On-Road Heavy-Duty Natural Gas Engines Meeting 2010 Emissions Standards by 2007

In 2005, the Board approved natural gas engine projects with John Deere Power Systems and Cummins Westport, Inc. to develop, demonstrate, and certify on-road heavy-duty engines meeting 2010 emissions standards by 2007. For both projects, the U.S. Department of Energy (DOE) was anticipated to provide significant cost share. However, the DOE 2006 budget does not include any natural gas engine development, resulting in a significant shortfall for these projects. Cummins Westport, Inc. and John Deere Power Systems indicated that they are committed to commercialize heavy-duty natural gas engines meeting 2010 emissions standards as early as possible given the budgetary shortfalls, but could not guarantee commercializing the engines by the beginning of 2007 without additional funding assistance. This action is to supplement the original awards with an additional $700,000 each from the Clean Fuels Fund. The total project costs of the two programs will be $1.39 million for the Cummins Westport, Inc. project and $1.3954 million for the John Deere Power Systems project with total costs over $12.5 million for both projects.

Technology, March 31, 2006, Recommended for Approval

RECOMMENDED ACTIONS:

1. Authorize the Chairman to amend the existing contract with Cummins Westport, Inc. (contract no. 05244) to cofund the development and certification of a heavy-duty natural gas engine by increasing the contract value by $700,000 from the Clean Fuels Fund.  The total contract award will be $1,390,000.
2. Authorize the Chairman to amend the existing contract with John Deere Power Systems, Inc. (contract no. 06033) to cofund the development and certification of a medium/heavy-duty natural gas engine by increasing the contract value by $700,000 from the Clean Fuels Fund.  The total contract award will be $1,395,400.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

In 2005, the Board approved natural gas engine projects with John Deere Power Systems and Cummins Westport, Inc. to develop, demonstrate, and certify cleaner engines meeting 2010 NOx emission standards by 2007.  For both projects, the U.S. Department of Energy (DOE) was planning to provide significant cost share.  Unfortunately, the U.S. DOE 2006 approved budget does not include any natural gas engine funding, resulting in a significant shortfall for these projects.

The existing contracts for the natural gas engine projects are summarized in the following table:

Cummins Westport, Inc. and John Deere Power Systems, Inc. indicated that they are still committed to commercialization of the natural gas engines meeting 2010 standards as early as possible given the shortfalls, but could not guarantee commercializing the engine by the beginning of 2007 without additional funding assistance.  Both engine manufacturers are actively seeking other funding partners on the national and international level, and have requested the AQMD staff to consider providing additional funding also.  Both engine manufacturers committed to having commercialized engines beginning in 2007 if a significant amount of the funding shortfalls is reduced.

Proposal

Staff believes it is critical that the cleanest engines be commercialized as early as possible in order for the region to achieve federal ambient air quality standards and reduce air toxics exposure.  In order to maintain the commercialization schedule of the medium- and heavy-duty natural gas engines, this action is to supplement the original awards with an additional $700,000 each from the Clean Fuels Fund.  Significant cost sharing is still being provided by John Deere Power Systems and Cummins Westport, Inc. for the remainder of their projects, which total over $12.5 million.  Both companies have committed to continue their plans to commercialize these cleaner natural gas engines beginning in 2007 with the proposed additional funding.  In addition, both companies will continue to seek additional funding assistance to make up the remaining shortfalls.

Benefits to AQMD

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,” and 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-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 greater emission reductions earlier compared to diesel counterparts, which will more than likely be certified to 1.2 g/bhp-hr for NOx compared to 0.2 g/bhp-hr NOx.

Resource Impacts

The total amount of AQMD funding for this amendment shall not exceed $1,400,000 from the Clean Fuels Fund, with the remainder of the total $9,740,910 project costs being provided by other partners, including the proponents.

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.