The Golden State Rules

California flexes its regulatory muscle.

In many ways, California stands alone. With a population of 36 million – 12 percent of the whole United States and 50 percent more than the second largest state – the Golden State dwarfs others as a market. Its gross state product of $1.8 trillion would place it among the world’s top economies. California is a major supplier of produce and home to several ports of entry – especially the crucial ports at Los Angeles and Long Beach.

And, notes Mike Tunnell, director of environmental affairs for the American Trucking Associations, California is No. 1 in another category: Air pollution. California’s nonattainment area – a zone where either ozone or particulate matter (PM) exceeds levels the U.S. Environmental Protection Agency deems acceptable – stretches from north of San Francisco to San Diego.

As a consequence of its large size and daunting environmental challenge, California has built what is undoubtedly one of the largest non-police state agencies in the nation: the California Air Resources Board, or CARB. Directed by an 11-member board appointed by the governor, CARB’s staff includes more than 1,000 engineers, scientists, attorneys and analysts.

CARB’s efforts already have resulted in a number of changes for trucking, from a state-specific diesel formulation to engine idling restrictions to a retrofit/replacement mandate on reefer unit engines that needs only a waiver from the federal government to take effect. But two of the most significant measures to date go before CARB’s board of directors for approval this month. The first draft regulation would mandate the retrofit or replacement of close to 1 million medium- and heavy-duty diesel engine-powered trucks. The second would mandate certain standards for tractor and trailer aerodynamics and tires in an effort to improve fuel economy and reduce greenhouse gases.

These regulations and most others that CARB adopts affect trucks operating in California regardless of where they are based or registered. In fact, the state’s environmental initiatives may affect you even if your trucks never enter the Golden State.

Out with the old
The proposed retrofit/phaseout of older diesel engines – informally known as the truck and bus regulation – is the latest and largest CARB regulation for dealing with NOx and PM, says Matt Schrap, who heads environmental affairs for the California Trucking Association.

California is so far out of attainment that it is pursuing some drastic measures, and mobile sources like trucking are the only way to get there, he says. “It’s a 30-year problem that they are trying to solve in five.”

The rule would apply to heavy-duty diesel-powered vehicles with gross vehicle weight ratings greater than 14,000 pounds. The proposed rule contains several noncommercial exemptions and gives small fleets – those owning one to three vehicles – more time to comply. It also includes special provisions for unique vehicles, certain types of agricultural vehicles and drayage trucks, the latter of which already are covered by a separate regulation.

The draft regulation – due to be considered at a Dec. 11-12 board meeting – would reduce PM and NOx emissions by requiring fleet owners to replace vehicles or engines with lower-emissions trucks or engines or upgrade them with best available control technology (BACT). For PM, the BACT standard generally is an engine equipped with a diesel particulate filter. For NOx, the standard is an engine newly manufactured in 2010 or later.

Requirements begin in 2010 with the installation of verified PM DECS (diesel emission control strategy) on certain vehicles depending on their model year. Beginning in 2012, fleets would need to begin replacing their vehicles with newer used or new vehicles that meet 2010 model year engine emissions standards. By the beginning of 2014, nearly all on-road diesel engines operating in California either will have a verified PM DECS or will have come from the factory installed with a diesel particulate filter. Between 2012 and 2022, fleet owners would have to replace remaining older vehicles. By 2023, all on-road diesel vehicles operating in California would have to meet 2010 model year emissions standards.

CARB is proposing several flexible options for compliance, including retrofitting or replacing all vehicles operated in California or achieving certain goals for either meeting certain percentages or averages.

Although a majority of the 940,000 trucks technically affected by the truck and bus regulation are based outside California, everyone acknowledges that as a practical matter California-based fleets bear the brunt of the costs, Schrap says. That’s because most long-haul fleets operate trucks that would comply simply by virtue of their age. In addition, the regulations specifically apply to brokers based in California but not to those based elsewhere, creating a significant competitive issue, he says.

CARB estimates the total cost of the truck and bus regulation to be $5.5 billion – about $4.5 billion for California-based fleets and $1 billion for vehicles registered outside the state. That’s high, but it significantly understates the true impact, Schrap says. CARB classifies the rule as affecting 170,000 businesses, which appear to be just entities running trucks – not all the businesses associated with those trucks’ operations.

By CARB’s own estimate, the truck and bus regulation would cost 13,600 jobs by 2013, and again, that might understate the true impact, Schrap says. The potential loss of jobs has introduced a new consideration into the debate: health insurance. Ultimately, CARB’s rules are about promoting public health. Projected job losses have given some CARB members pause, Schrap says. “Some of the doctors on the board wonder what happens when those benefits disappear, putting more of a strain on emergency rooms.”

CTA is a member of a coalition called Driving Toward a Cleaner California (www.drivecleanca.org), which has floated an alternate plan that includes specific provisions for single-unit trucks, credit for early retirement of equipment and double credit for operating hybrids.

To be fair, California is offering to offset a significant portion of the total costs though several grant and loan programs. Those opportunities have some strings attached, and the amount actually available probably is far less than what has been portrayed publicly, Schrap says. But anything helps, he concedes. “It’s better than a sharp stick in the eye.”

In with the green
While the truck and bus regulation likely will hit California fleets hardest, out-of-state fleets will bear the brunt of the proposed regulation to reduce greenhouse gas emissions from heavy-duty vehicles. By CARB’s estimates, nearly 90 percent of the tractors and trailers affected would be operated by long-haul fleets based outside of California.

The greenhouse gas initiative launched by Gov. Arnold Schwarzenegger in 2007 is controversial because unlike NOx and PM, carbon dioxide and similar gases are not inherently toxic. So the campaign is more about politics and setting an example for the rest of the nation and the world than about solving California’s particular environmental problems.

Under the draft regulation to be considered this month, CARB would impose aerodynamics and tire rolling-resistance standards on 53-foot or longer box-type trailers – dry vans and refrigerated trailers – and on the tractors pulling them. The rule is aimed at long-haul operations and exempts short-haul and drayage tractors.

Beginning Jan. 1, 2010, any 2011 model year and newer tractor with a sleeper berth that pulls a 53-foot or longer box-type trailer on a California highway must meet EPA SmartWay certification. Model year 2011 and newer day cabs are exempt from this requirement since SmartWay doesn’t certify them, but CARB would require that they use low rolling-resistance tires. Effective Jan. 1, 2012, older sleeper and day cab tractors pulling 53-foot or longer box-type trailers must be equipped with low rolling-resistance tires.

Also beginning Jan. 1, 2010, 2011 and newer 53-foot or longer box-type trailers would be required either to be SmartWay-certified or retrofitted with SmartWay-approved technologies. Currently, the only trailers with SmartWay certification are dry vans. So for refrigerated trailers, fleet owners would need to retrofit with SmartWay-approved technologies, such as trailer skirts and front and rear fairings.

By Jan. 1, 2013, fleets would have to retrofit all 2010 and earlier model year 53-foot box-type trailers. Alternatively, a fleet could choose to abide by a compliance schedule varying by fleet size as long as it agrees to CARB auditing. The agency also proposes to delay compliance until 2017-2019 for refrigerated van fleets operating 2003-2008 model year trailers with diesel-fueled transport refrigeration units (TRUs). CARB offers this flexibility in light of the regulatory burden reefer fleet owners face in replacing or retrofitting their TRUs.

CARB puts the equipment costs with the regulation at $10.4 billion through 2020, but on the whole the agency sees a net benefit for fleet owners based on estimated fuel savings of $14.7 billion. The agency’s staff assumed an average diesel price of $3.14, which at the time seemed quite conservative.

ATA’s Tunnell says California is missing the point of SmartWay – and not just because the SmartWay Transport Partnership was intended to be voluntary. SmartWay offers a range of options – routing, logistics, anti-idling, speed management, etc. – depending on what makes the most sense for the motor carrier. “Under the federal program, a fleet can decide where to spend its efforts,” Tunnell says. “CARB is saying that you will spend your resources on equipment whether it is the best way to do it or not.”

“This is a de facto national regulation,” declares CTA’s Schrap. Dave Williams agrees. Due to the complicated logistics involved in running a national operation, carriers that serve California will have little choice but to adopt SmartWay specs for all trucks and trailers affected by the rules, says Williams, who is vice president of equipment and maintenance for Phoenix-based Knight Transportation.

Williams also points out that CARB seems to be operating in a vacuum. Several Western states, including California, have joined in an effort known as the Western Climate Initiative (www.westernclimateinitiative.org), which is pursuing a cap-and-trade regime as a way to reduce greenhouse gases. Such an effort would be cumbersome for trucking operations, but certainly if fleets must abide by it, the CARB equipment regulations become unnecessary and even more costly.

Everyone concedes that fleets would save some money on fuel due to the proposed regulation, but not necessarily to the tune of $14.7 billion. “So many factors come into play in realizing the benefits,” Tunnell says. For example, aerodynamics and rolling resistance really matter only if the truck can maintain highway cruising speeds. “With California one of the most congested states, you are losing some of those benefits right off.”

Indeed, it might just be illegal to achieve the full benefits of California’s proposed greenhouse gas reduction rule. Assumed savings from meeting SmartWay specifications are based on operating at 62 mph, but in California, the speed limit for trucks is 55.

Residual effects
Even if you never cross California’s borders, you could feel some effects, especially with the greenhouse gas reduction rule. Under the draft regulation, if you buy a model year 2011 tractor that doesn’t meet SmartWay specs, you effectively are writing off a significant piece of the secondary market when the time comes to trade or sell. The problem may be greater for trailers due to their longer life and the fact that older trailers must be retrofit by 2013. You could expect to lose at least the retrofit costs, which CARB places at $1,900 to $4,200.

This is hardly a hypothetical concern. Refrigerated carriers already have seen the residual value of equipment drop due to CARB’s TRU rule – even though the agency can’t enforce it unless it obtains a waiver from EPA. The TRU rule would require the retrofit or repowering of TRU units seven years or older at an estimated cost of $7,000 or more each. Al Shufelberger, president of Redding, Calif.-based RLT Inc., says he lost thousands of dollars per trailer recently when he bought new ones. It’s a double whammy because CARB is simultaneously forcing fleet owners to buy new trailers or upgrade old ones while its actions are driving down the value of existing equipment, Shufelberger says.

It just goes to show you once again: What happens in California doesn’t stay in California.

For more on CARB regulations and the Clean Truck Program at the ports of Los Angeles and Long Beach, view the archived Oct. 30 webinar “The Impact of California on Trucking Operations” at www.ccjwebinars.com.


Two ports in a storm
LA/Long Beach concessions programs raise federal issues

One of the biggest legal cases involving trucking this year surrounds concession agreements imposed by the Port of Los Angeles and the Port of Long Beach as part of their new clean trucks programs. At heart, the lawsuit is about the authority of state and local governments to regulate the rates, routes and services of trucking companies, says Curtis Whalen, head of the Intermodal Carriers Conference (IMCC) of the American Trucking Associations. “It’s about the concept of requiring motor carriers to sign binding contracts on a whole range of issues.”

Motor carriers that want to continue serving the two ports were required this fall to sign concession agreements that subject fleets to third-party oversight in the areas of finances, parking, safety, maintenance and a host of other issues. The district court agreed with opponents on almost every score but allowed the concessions to continue on the grounds that the ports were citing security concerns as a justification.

ATA, which brought the litigation, opposes the concession agreements at both Los Angeles and Long Beach, but it finds especially troubling the Port of Los Angeles ban on use of owner-operators. It’s an unwarranted and irrelevant intrusion into trucking companies’ operations and business models, ATA says.

“This is clearly a program set up by the Teamsters,” Whalen says, adding that he has Teamster briefing materials discussing a plan to ban independent contractors, which can’t be organized.

Like ATA, the Federal Maritime Commission is seeking an injunction but on different grounds involving shipping law. For ATA, the Los Angeles and Long Beach concessions are an affront to federal preemption against regulation of rates, routes and services – a protection reaffirmed by the U.S. Supreme Court just this year.

“If you take a look at communities around the country, they always want to say, ‘You can’t take this interstate highway,’ ” Whalen says. If the concession agreements stand on the grounds of national security, it will become easier for communities to do just that, he says. “We need to keep states from developing a patchwork. It undermines federal preemption and the concept of interstate commerce.”