CARB Votes to Shore up PLACE Program - Verbal Terstimony Copy Below

7/25/2013 CARB Testimony

Matt Schrap, Crossroads Equipment Lease and Finance

CalCAP AQIP Allocation

Thank you Madame Chair and Board members, my name is Matt Schrap. I am Vice President of Government Programs for Crossroads Equipment Lease and Finance and the Velocity Vehicle Group of Companies. We appreciate the opportunity to share our support regarding the AQIP funding plan, specifically for the Providing Loan Assistance for California Equipment or PLACE truck loan assistance program administered through the treasurer’s office highly successful California Capital Access Program.

The truck loan assistance program is the most integral funding program available for small and medium sized California based trucking fleets. Leading to the consensus that the $2 Million currently allocated, although a step in the right direction, it is not nearly enough.  There is a reason why the program is so popular, Crossroads and our fellow participating lenders have been able to help 1000's of California based businesses secure commercial financing in one of the tightest credit markets in recent history. Without this program, most of these businesses would not have been able to secure the needed capital for equipment purchases required by law. These transactions are driven by state turnover mandates not mainstream consumer acceptance.

In that vein, it is important to remember that the PLACE truck loan assistance program has not only helped businesses who could not qualify for commercial credit on their own, but it has also helped reduce Particulate Matter (PM)and Oxides of Nitrogen (NOx) emissions by 1 ton and 4.5 tons per day ahead of regulatory deadlines.

In addition to reducing emissions, the PLACE program creates and retains jobs in California. According to the Treasurer’s office, in 2012 alone, close to 300 jobs were created and over 1500  retained because of loans that were enrolled in the on-road truck assistance loan program.

Whether funds are distributed through AQIP, 1B or other funding sources; the program needs your help. It should not be eclipsed by efforts to rebate vehicle purchases for consumers or businesses who can already afford particular configurations or platforms. There are literally tens of thousands of small and medium sized businesses all over the state who need your help.

CARB recognized the need for this program in 2009 because of regulatory needs and limited access to capital. Although the economy is improving, we are still left with the old adage, “good people, bad credit”. It is in fact an unfortunate reality for the trucking industry, especially for the small and single truck operators.

At Crossroads we see these Credit profiles daily and know that without CalCAP and PLACE, these operators would not be able to secure the affordable financing necessary to run their businesses.

Your leadership is again needed to direct additional funds to this laudable program. If the $5 Million additional surplus is realized, most if not all of it should be allocated to PLACE and CalCAP for additional enrollees through 2013 and beyond. The PLACE program is a proven, successful loan assitance program that can help small and medium sized California businesses secure the cleanest Heavy-Duty equipment today. In fact, CalCAP and PLACE is the public-private partnership model for transporation equipment finance assistance today.  

Please support and maintain funding for the truck loan assistance program and direct staff to seek out additional funds to help keep the wheels turning. Thank  you.

Driver Management and Reducing Emissions

New technology puts an industry asset to the test

It is no secret that the Golden State has driven engine standards for both on and off-road heavy duty equipment. Now that the major upgrades for national on-road engine standards are implemented, a new set of challenges is coming to the regulated community who is being forced to adopt technology they are not previously accustomed to. Sophisticated emissions control systems are at the heart of every heavy duty diesel engine manufactured for sale today. Ever-increasing costs of these sophisticated emissions controls has forced the industry to take a hard look at cost saving measures to offset the cost of the vehicles and to save on the bottom line as everything needed to operate a transportation company becomes more expensive. Aerodynamic devices, low rolling resistant tires, route maximizations, along with technological solutions are all worthwhile budget friendly measures that may in fact boost fuel economy with little up-front costs.

A not so recent discussion of potential fuel savings has started to emerge again around the actual operation of the vehicle. Those in the trucking industry know that you could give the same truck to two different drivers, with the same routes under the same conditions and get two drastically different results. The newest emissions technology is even more sensitive to driver habits. Without proper training and direction potential fuel savings could be lost under the pedal.

Drivers are the backbone of the transportation industry in this country. As a consumer society, we remain oblivious to the challenges faced by these brave men and women who dedicate their professional careers to transporting our medicine, our groceries and our mail. Trucking is an economic bellwether of the US; over 80% of the freight by volume is carried by truck. With population and consumption estimates on the rise, more trucks and more drivers will be needed to keep the wheels of our economy turning. With an already dwindling driver pool, it is up to the industry to best equip the hard working folks who haul our freight with the tools necessary to maximize the return potential of this valuable equipment.

 

Several driver training programs are being developed to help existing and incoming drivers understand efficient operation of these complex machines. Serious direction from those contracting or employing drivers to complete an efficiency management program is needed to realize additional fuel and maintenance cost savings. Motor carriers should step up and invest in training that providess a noticeable return in efficiency and fuel savings. After all, since drivers are their best assets, carriers should enrich their experience to reap the rewards.

Out of PLACE and Running Out of Time…

The California Air Resources Board to consider life support for highly successful program

In 2008 the California Legislature directed a one-time $30 Million appropriation to CARB for implementation of a Truck Loan Assistance Program, specifically directed towards turnover of vehicles ahead of the On-Road Truck and Bus Rule. CARB partnered with the California Pollution Control Financing Authority (CPCFA) in 2009 to develop the program based upon their highly successful small business loan program, the California Capital Access Program or CalCAP that the CPCFA administers through the California State Treasurer’s office.  

The CARB and CPCFA program is officially known as PLACE, or Providing Loan Assistance for California Equipment, and despite a very slow start, the program has been buoyed and supported by local finance companies and banks, growing into the model for public-private financing partnerships for clean equipment purchases. The program could not have come at a better time as the tightening credit markets during the great recession left those with less than stellar credit few, if any options.

The only requirements for PLACE eligibility is having 40 or fewer trucks, less than 100 employees and no more that $10 million dollars of average annual revenue for the past three years with 51% of business occurring in California. For most trucking companies operating in California these requirements were a no brainer and subsequently, as of June 2013, over 3,000 trucks had been funded in the program. This represents approximately $28 Million in truck loan assistance funding that has been leveraged into $187 Million in private financing.

Nevertheless, in spite of its success, the program is running out of money. Thousands of truck operators in California are still facing upgrade requirements. With little or no access to grant money and less than desirable commercial credit history the norm, they are at a Crossroads; upgrade or leave the industry. Adding to the conundrum is the fact that CARB staff has told the CPFCA and the participating lenders that there will be no more Air Quality Improvement Fund money allocated to the program after the final $2 Million is offered as a sacrificial lamb at the July 25, 2013 Board Hearing.

Although up to $5 Million extra or surplus dollars may be available, CARB has given indications that the additional money will be used to fund oversubscribed programs that provide discounts to commuter minded citizens who want to purchase an electric car and other such programs that do not involve financing assistance for the turnover of heavy duty truck tractors.  Heavy duty truck operators with marginal credit will soon lose access to their only refuge for competitive financing in California. With truck prices on the rise, and regulatory requirements baring down on the industry like and unregulated freight train, a perfect storm is on the horizon. The industry in California will need to step up and meet their own daunting financial challenges as state assistance is swept away on Leafs and Volts.

Order Early, Order Often

CARB Clarifies the 4-Month Early Order Provision for On-Road Truck and Bus Rule Compliance

Once and a while, most taxpayers will agree that the government “gets it right”…sometimes. With such a small consensus on actions of late that would qualify for that designation, it is refreshing to see the great state of California reminding people about a little known and often misunderstood provision within the On-Road Truck and Bus Rule that they “got right” so to speak.

 

In the era of cheaper, faster and NOW! We find ourselves becoming more and more intolerant of delayed gratification. While technology has made things move at the speed of light, it has also complicated matters for some industries (or generations) that are used to a snail’s pace. When it comes to new diesel engine or retrofit technology CARB did in fact recognize the need to give considerations for these highly technological pieces of custom equipment when they are being ordered directly from the factory. Many fleets have experienced delays from original equipment manufacturers when ordering vehicles with unique specifications, or when ordering retrofits at the same time as everyone else. Needless to say, there is only so much capacity to go around.

Because of these issues, CARB included into the regulation the so-called “4 month early Order Provision” or aptly named, Compliance Extensions for Emissions Control Device Manufacturer Delays 2025(p)(8)(A-E). Although it says “Emission Control Device Manufacturers”, it also applies to new truck or vehicle purchases. So if a fleet places an order by August 31 of the year preceding compliance, and has a bona fide order for the equipment, then if the equipment does not deliver until into the compliance year, they will not be cited. This DOES NOT delay the rule, but merely provides a small amount of flexibility for fleets who were thinking ahead and ordering equipment for compliance well before the deadlines.

If a fleet waits until September 2^nd to order the equipment, the extension will not apply. And it will definitely not apply to any equipment that is ordered in December for January compliance. Typical build time for custom spec trucks is 90 to 120 days at a minimum, so the 4 month provision will allow ample time to get the truck in the fleet or at least demonstrate a commitment to achieving compliance.  CARB does not want to punish fleets who are making the effort to comply, but, they want to see a legitimate effort being made. Check out the advisory from CARB below and happy trucking!

 http://www.arb.ca.gov/msprog/mailouts/msc1315/msc1315.pdf

Expiring Exemptions Inching Ever Closer...Are You Ready?

Small Fleets in California Face Major Upgrades at end of 2013

On January 1, 2014, a major exemption for small fleets (3 or less trucks) runs out. This means that the over 100,000 single, two and three truck operators registered in California and coming into California from all over the country are facing an upgrade requirement at the end of 2013. What this also means is that anyone who dispatches one of these heavy duty diesel vehicles in California or into California after 2014 will be subject to penalties if a non-compliant small fleet vehicle is found; no mater whose authority they are operating under.

 

Although only California based brokers are subject to direct penalties under this regulation, any motor carrier based anywhere will be caught up in the regulatory web and fined, potentially for each dispatch going back to the beginning of 2012. CARB has already levied heavy fines against drayage operators who dispatched non-compliant vehicles to covered Intermodal facilities over the past 3 years and just levied a $300,000 fine against a fleet for engaging in dray-off near the Mexican border. Proof in point that no one can escape the regulatory gauntlet; if you are operating in California, you must meet the standards.

To hammer home their authority where they need it, CARB has a couple of different measures at their disposal. One that allows them to deny registration at time of renewal through California DMV if a fleet has not paid their CARB related fines and another, in conjunction with CHP that allows them to impound vehicles that have cancelled registration because of outstanding violations. CARB can even levy an unfair business practices lawsuit against violators if the infraction is serious enough.

When they find you, they will fine you, and as many California diesel operators can attest, CARB settlements instruct you on how much you will need to pay in order to clear the citation; it is not really a negotiation, they settle on an amount and you pay it. The fine amount is of course in addition to the additional capital required to upgrade the equipment to meet the standards; a double edged pendulum for anyone who gets caught operating or dispatching non-compliant equipment.

Active engagement in the requirements is necessary to minimize the risk that all transportation businesses face when turning miles in the Golden State. Although the skies in California are getting clearer, the industry can expect more hazy insinuations from regulators regarding zero-emission freight corridors and sustainability plans that seek additional reductions from the on-road diesel sector. The efforts around emissions reductions are far from over, the sky’s the limit, no matter how clean (or dirty) it gets.

 

Breaking Wind? Easier to ask Forgiveness than Permission.

CARB to Request Clean Air Act Waiver for Certain GHG Truck and Trailer Provisions

In 2008, CARB passed the so called “SmartWay” rule for truck fleets hauling 53’ or greater, box type trailers on highways in California. Modeled after the EPA program that scores truck fleets for fuel saving measures by encouraging use of SmartWay Certified technologies, The GHG Tractor-Trailer Regulation requires SmartWay Certified aerodynamic upgrades and tire replacement for fuel savings. These efforts are to meet goals under AB 32, the landmark legislation limiting GHG emissions from sources in California.

The segment of the industry that falls into the rule must install trailer skirts and low rolling resistance tires on their covered trailers  that travel more than 100 miles away from the local haul base of that piece of equipment. These local haul trailers must be registered with CARB reported on annually. CARB and expects the entire covered population to have tires in 2015 and outside of exemptions, SmartWay certified skirts by 2016.

Another part of the rule requires any 2011 or newer model year 53’ or greater trailer or 2011 or newer tractor that will be hauling a 53’ or greater covered trailer to be SmartWay equipped when purchased in California. The local haul trailer exemption may be applied, but it will require reporting after the trailer has been purchased.

Despite trucking industry skepticism over the reported benefits of the rule, In December 2008 it passed without much discussion, as it was playing second fiddle to the larger rule being adopted on the same day, the On-Road Truck and Bus Rule. During development of both rules CARB claimed they did not need to apply for a Clean Air Act waiver for any part of either rule.

Lately, opinions from CARB legal staff have surfaced over the need for a waiver to enforce the 2011 and newer trailer and tractor provisions. Specific details are pending, nevertheless CARB sources have confirmed that they will be seeking a waiver and should be filing with the EPA in the coming weeks.  

 

The provisions requiring tires and aerodynamic upgrades on existing equipment will be unaffected by the waiver request. CARB will be looking for skirts on non-exempt trailers during enforcement inspections and audits. Although it is clear that the majority of the rule will reamain unchanged,  a renewed discussion should emerge regarding the effectiveness of the entire rule. Stay tuned to learn more!

 

 

Got Funds? Statewide Truck Grant Solicitation To Open in August 2013

CARB to recommend $78.5 Million Dollars for truck upgrades in the South Coast Air Quality Management District alone!

California Air Resources Board staff laid out funding recommendations for the 4^th round of Proposition 1B grant funds today at a workshop in downtown Los Angeles.

On July 25, 2013, CARB staff will go before their board to request $154 Million for emissions reductions projects across the state. The SCAQMD will be receiving the lion’s share of the funding, all of which is slated for truck replacement. Grant applications will be released sometime in August, at that time truck  operators who can demonstrate CARB compliance for 2013 and 2014 can apply for up to $50,000 to scrap and replace a Class 8 truck equipped with a 1994-2006 engine.

In order to be eligible, truck operators must meet the above criteria and operate a minimum of 75% of total miles in California with the truck they are looking to replace. This is the last opportunity for operators to access grant funds for diesel to diesel replacement outside of the Carl Moyer Voucher Incentive Program or District specific funding opportunities. Other grant replacement  funds are drying up quickly and truck operators will be hard pressed to find public money once 2014 rolls around.

In 2014 the vast majority of the fleet in California will be under regulatory requirements (see CARB Conundrum Post), and state law says public money cannot be used for compliance. So once the rule covers the truck, no public money can be used to upgrade.

Despite the major need for additional funding, not everyone will be eligible. Only operators who travel within the 4 major trade corridors (see map below) and transport “goods” 51% of their total fleet miles can apply. Transporting “goods” basically refers to moving any cargo that is part of a transaction for sale.

 If a fleet can demonstrate the travel requirements, two years of continuous registration, CARB compliance etc, they can apply. For everyone else operating outside of the goods movement corridors or not transporting cargo as part of a sale must use their own (or their bank’s) capital to secure equipment for compliance.

Nevertheless, for those who may qualify, tens of thousands of dollars are available for equipment purchases. Record keeping and annual reporting is required once the grant is processed, and recipients will also receive a 1099, but as many past 1B Grant recipients can attest, “it is better than a sharp stick in the eye”.

Skin in the Game? The Supply Chain is in the California Emissions Enforcement Crosshairs...

CARB Laws will hold shippers, receivers, brokers, motor carriers and drivers liable for emissions compliance.

Over the past five years and especially in 2012, the California Air Resources Board realized that practically the entire supply chain must be responsible for the dispatch of emission complaint vehicles if their in-use, On-Road diesel, GHG and Transport Refrigerated Unit regulations were going to be successful.

Currently, active enforcement of all major trucking rules is underway and motor carriers are feeling the pinch of putting off required compliance upgrades that have been in effect for the past several years. Fines in the hundreds of thousands have already been issued and several other cases are currently under review by CARB enforcement staff.

Adding insult to procrastination or outright disbelief is the fact that carriers must not only pay the fines, but must also still upgrade all their non-complaint equipment if they are cited. Not to mention the annual reporting and the continuing education classes that is a part of any settlement agreement with CARB.

The Drayage regulation and the On-Road regulation both hold motor carriers and California based brokers responsible for dispatch of emission compliant equipment to ports and intermodal railyards, and for over-the-road dispatch if the trucks are equipped with a particular engine model year category.

California based brokers and motor carriers are also held responsible for dispatch of non-complaint Transport Refrigerated Units or “refers” and non-aero-dynamically equipped “non-exempt” trailers under the TRU and GHG regulations respectively.

Within the rest of the supply chain, and coming as an unpleasant surprise to many, California Shippers may also be held responsible for dispatch of non-compliant refers and trailers. Furthermore, any Receiver based in California that has arranged for refrigerated transport may be cited if non-compliant equipment is used to move the goods. 

That means, if a non-compliant refer unit is found operating in California, the operator and the dispatching motor carrier will be fined, the broker that arranged for the transport will be cited and the shipper, the receiver and subsequently the beneficial cargo owner may be cited if they are based in California.

Any California based entity that arranges for the transport of goods is within the chain of enforcement. Recently, CARB has even proposed to include idling citations as something shippers and brokers may be held accountable for.

Several exemptions exist under the idling regulation, including an engine specific exemption for 2007 and newer model year engines that are controlled specifically for idling. And although several exemptions exist within the Drayage, On-Road engine and GHG trailer rules, all require specific reporting deadlines in order to utilize the options that provide additional flexibility.

So, if a carrier isn’t meeting the standards or has not reported to receive exemptions, they will be cited and after a CARB audit of the violating carrier or operator, other “responsible” parties will be receiving CARB correspondence asking for records in order to build the case for citations and eventually fines.

It is important to understand that CARB has come to these requirements in part, after discussions with motor carriers who are not getting the appropriate rate increases from their customers to pay for the more expensive compliant equipment and in part because shippers, receivers and brokers are still seeking the cheapest alternative for shipping of goods, essentially providing a market for non-complint carriers who operate outside the law, skirt the fines and fold up shop at the first sign of trouble.

The TRU, Drayage and On-Road rules have major engine upgrade requirements slated for a good chunk of the industry at the end of this year.  Millions of dollars will need to be spent in the coming months to meet the requirements. One way or another, someone needs to pay, and as grant opportunities dry up, many truck operators will be hard pressed to find the cash to comply.

In CARB’s mind, if shippers, receivers and brokers can be cited along with motor carriers, only compliant carriers will be dispatched and contracted with, thereby encouraging the market for those compliant carriers who have made the necessary investments to help achieve CARB's mission of cleaner air for California.

PDF LInk to Article: http://www.crlease.com/files/skin-in-the-game.pdf 

For more information on CARB and other Air Quality news in California go to http://www.cafleetsolutions.com/news.htm and sign up for the mailing list.