Winds of Change Are Coming: Many States Eye California-Style Emissions RulesBy Mary Sedor
Article Date: 04-01-2009
Copyright(C) 2009 Associated Equipment Distributors. All Rights Reserved.
And they're not blowing smoke - but dealers have an opportunity to turn stricter regulations into aftermarket revenue.
Approximately 15 to 20 states are lining up behind California, poised to adopt that state’s strict off-road heavy-duty diesel vehicle emissions standards. But before these states can adopt the regulations, California has to first be granted a waiver from the U.S. Environmental Protection Agency (EPA), an approval that some experts say will happen – it’s only a matter of time.
The California Air Resources Board (CARB) adopted the off-highway diesel emissions regulations in 2007 to reduce diesel particulate matter (PM) and oxides of nitrogen (NOx) emissions from in-use (existing) off-road heavy-duty vehicles in California. These vehicles include equipment used in construction, mining and industrial operations.
This so-called “retrofit rule” requires fleets to apply exhaust retrofits that capture pollutants before they are emitted to the air, and to accelerate the turnover of fleets to newer, cleaner engines. Turnover, as defined by CARB, involves one of the following: Repowering with a cleaner engine, rebuilding the engine to a more stringent emissions configuration, retiring a vehicle, replacing a vehicle with a new one, or designating the equipment low-use.
“In California this has really thrown a lot of panic into the construction equipment industry because California is mandating that on-road vehicles as well as off-road vehicles meet new lower emissions standards that can only be met by a quicker retiring of older pieces of equipment or retrofitting,” said Dawn Fenton, director of policy at the Diesel Technology Forum.
Under California’s regulation, fleets totaling more than 5,000 horsepower for equipment used more than 100 hours annually would have to start meeting fleet-average nitrous-oxide (NOx) and soot targets next year. Medium-sized fleets with 2,500 to 5,000 horsepower would have to start complying in 2013, and small fleets would have to hit just the soot standards starting in 2015.
CARB asked the EPA to approve the state’s recently adopted off-road engine emission standards. The EPA must review and approve California’s standards before the state can legally enforce them, a process the Clean Air Act calls “granting a waiver of federal preemption.”
“California is the only state under the Clean Air Act that is allowed to develop emissions rules for things like off-road construction equipment,” said Mike Buckantz, an expert on environmental regulations in California. “When California has a final rule, they have to go to the EPA and essentially ask for permission to enforce the emissions standards of the rule they developed.”
If the EPA grants the state’s waiver request, other states would be free to adopt California’s new rules, which apply to all off-road diesel fleets currently in use.
“No other state can adopt California’s regulation until the EPA grants California a waiver,” Buckantz said. “It’s going to happen – it’s just a matter of time.”
According to the Associated General Contractors of America, industry estimates that the cost of compliance will reach roughly $13 billion in California alone. Nationwide, the cost to industry would be immeasurable.
Budget Crisis Causes Delay
California’s budget crisis has increased the flexibility contractors have in meeting the regulations. While the industry still must meet the same standards, there is greater flexibility in absorbing the costs of retrofitting and repowering the equipment.
“There is some question right now as to whether this is going to trigger a start-over of the waiver review process,” said Buckantz.
If California’s track record of receiving waivers is any indication – the state has only been denied a waiver once – then it’s still just a matter of time before other states follow suit.
States to Watch
Among the states that are ready to follow California’s lead, many have what Buckantz refers to as a nonattainment area – several counties that do not attain the federal clean air standards for ozone.
“One of the things the off-road rule does is cause really big reductions in NOx through this equipment turnover. In a lot of states that have ozone nonattainment areas they are trying to get the NOx reduced to achieve the federal ozone standard.”
In addition to nonattainment areas, other states want California’s rule because they have a particulate matter problem, he said.
“There is a relatively new federal standard coming into effect now for particulate matter and a number of states have a problem meeting that standard,” he said. “They want to get after off-road diesel emissions to meet those standards, and that’s why they want California’s rule.”
So which states are the “hot spots” for implementing an off-road diesel emissions rule?
Joe Mastanduno, product marketing manager, engine/drivetrain for John Deere Construction & Forestry Division, identified six key areas that are ripe for adopting strict standards. A portion of Mastanduno’s job is devoted to educating Deere dealers on emissions regulations and observing emissions legislation throughout the country.
“We’re monitoring states and telling dealers to watch whatever happens in California because it’s going to happen in other regions too,” said Mastanduno. “California has a reporting system and a structured approach – they’ve laid a lot of groundwork for other states.”
He identified the following areas as “hot spots” to watch:
1. The Northeast – A group of 13 states in the Northeast are the ones to watch, said Mastanduno. He predicts they will adopt the regulations together.
2. The Midwest – specifically around the Chicago area, the Great Lakes region including Wisconsin and Ohio
3. Texas – The state has money available and no statewide regulation
4. California Border States
5. Southeast – Georgia, Florida
6. Northwest – Oregon and Washington
“At any time these states could jump up the list,” said Mastanduno. “That’s why we have to keep monitoring it.”
Several states on Mastanduno’s list already have legislation in committee relating to the diesel emissions regulation.
In Maryland, House Bill 532 in committee “requires state contractors to equip diesel-powered nonroad vehicles, heavy equipment and generators with emissions-reducing equipment.” The bill establishes three levels of emissions reduction, ranging from a 25 percent reduction from uncontrolled engine emissions levels to less than 0.01 grams of PM per brake horsepower-hour.
In Georgia, the state Senate Natural Resources and Environment committee is considering SR 109 to establish a joint study committee on the retrofit of diesel engines. The committee will study air quality benefits derived from the retrofit of diesel engines and evaluate various incentives to encourage retrofitting.
Further, Illinois has a bill in committee that was expected to take effect Jan. 1, 2009. Senate Bill 0296 creates the Illinois Diesel Emissions Reduction Act and the Illinois Diesel Emission Reduction Fund. The bill “requires the collection of a surcharge on the retail sale or lease of certain diesel vehicles that are of a model year 2006 or earlier and are not equipped with Level 3 (Tier 3) controls.”
Senate Bill 0296 “provides that the Secretary of State, in consultation with the Department of Transportation and Illinois EPA, shall promulgate regulations by October 1, 2010, to develop a program for registration of diesel nonroad vehicles, locomotives and diesel marine vessels, and shall implement the program beginning January 1, 2010.”
Preparing for Pending Legislation
The Illinois Equipment Distributors (IED) joined the Illinois Road and Transportation Builders Task Force to create a position paper about the Senate bill, which could sharply impact the construction industry in Illinois, including all users, contractors and equipment distributors. Under the legislation, Tier 3 equipment is in compliance, but a tax would be imposed on all noncompliant equipment.
“Illinois legislators in the 2009-2010 cycle produced a bill that would have initiated an Illinois move toward the California standards, beginning with the establishment of a diesel fund to assist with retrofitting,” wrote the task force. “That bill is currently in the Environment Committee and there has been little discussion of that bill as of late.”
Bob Jones, president of S.E.S. in West Chicago, Ill., and 2008 president of IED, is a member of the joint task force and continues to report on the group’s progress to IED. Currently IED is conducting a study to determine the average dealer and contractor fleet size to try to ascertain normal turnover rates.
“We are putting together a position paper to better tell our legislators what this would mean to our industry,” he said. “The bill would have a big effect on contractors, particularly with larger fleets. It would be designed similar to the California bill in that anything that is out of compliance would be taxed.”
Jones says that dealers must pay attention to this bill in Illinois and across the country.
“This affects everyone in the channel of distribution – from the manufacturer, to the dealer to the customer and job owner,” he said. “It’s going to happen – the various states will implement this type of legislation. We need to pay attention and gear up to address customer concerns over the equipment they have as well as the equipment [dealers have] in their rental fleets.”
While dealers will be affected by strict emissions legislation, Jones says that dealers really need to be prepared to assist end users. Not only would this kind of bill impact infrequently used, low-tier equipment, but it could also have provisions in it for retrofitting equipment.
“Dealers must be cognizant and understand that when this happens it is going to affect them,” said Jones. “We’re a long way from being prepared as an industry, but anything we can do to step up our ability to understand the requirements and how to address them will go a long way.”
Tips for Getting Prepared
When strict emissions regulations come to your state, Fenton recommends that dealers become knowledgeable about the different options for meeting emissions requirements including retrofitting, repowering and rebuilding.
“Location, age of vehicle, how much it is used, what it is used for and other factors all must be considered when deciding on which approach to use,” said Fenton. “Dealers need to be a good resource for their customers to make recommendations.”
Mastanduno recommends dealers familiarize themselves with the EPA and CARB Web sites, as well as get to know their local regulators. A dealer group in California works with its local regulators, and a similar group in Las Vegas is working to establish a group to get involved with creating the regulations.
“It’s a great way to keep the dialogue open with regulators, and I’m sure there are groups like this across the country,” said Mastanduno. “Dealers should know the regulators, get to know what they are thinking and what they are likely to implement.”
Ultimately, emissions legislation could lead to a plethora of opportunities for dealers, he said.
“In the beginning you’re helping the customer determine the right fleet management strategy and you’re really providing an emissions solution, but it could lead to new equipment sales,” he said. “And in a short time dealers could be doing repowers and retrofits – these could keep the shop busy and provide service revenue for dealers.”
A Dealer Getting It Right
Papé Machinery, a large John Deere dealer with locations in California, Nevada, Oregon and Washington, is taking the lead in Sacramento with regards to addressing emissions regulations.
Instead of taking a defensive tack with CARB regulators, Papé Machinery came at the changes seeking to become better educated and understand what the regulators were looking for, explains Josh Juenger, general manager of Papé Machinery in Sacramento. In addition to working with local regulators, Papé Machinery also spoke with their local legislators, petroleum companies, natural resources board – the gamut of companies impacted by the regulations.
“These regulators were just trying to do their jobs,” he said. “It behooves dealers and manufacturers to try to partner with them and not create an adversarial position.”
Papé Machinery also works closely with other Deere dealers and the manufacturer. The company participates in a dealer advocacy group in which representatives from area dealerships meet to discuss future emissions needs. They also participate in a customer advocate group in which they dialogue with end users.
“The resources are out there but they aren’t in any one manual or book,” said Juenger. “We’ve been creating our own resources and it makes sense to work with regulators, customers and suppliers to come up with solutions.”
Juenger says his advice to dealers would be to educate themselves so they can educate the customer. Papé Machinery spends time and money not only educating their employees, but also hosting customer clinics where the dealership has brought in CARB regulators and vendors of aftertreatment solutions.
“What we’ve tried to do is provide a service to customers because there are not a lot of resources out there to grasp all of this information,” said Juenger. “We feel that it’s our place in our market to educate our customers – we’re not trying to sell them anything. The sales and retrofit devices come as a result of our efforts to educate them.”
And deciphering between the options of retiring, repowering or retrofitting a unit is ultimately the dealer’s job – no one better understands what’s best and what will work on each machine.
“Go out and find the information, pull it together and learn what all the resources are – no one is going to come to you and say this is what you need to do,” he said.
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