Sustainable Freight and the Golden State

2015 is coming to a close and we are that much closer to the release of CARB’s draft plan for freight sustainability in the Golden State. Called appropriately enough the Sustainable Freight Transport Initiative (SFTI), it is the first coordinated plan of its kind that seeks to unite all transportation sectors operating in California under a clean air, high efficiency umbrella.

As we inch ever closer to its release, CARB and other agencies have been circulating clues for the potential direction of the plan. (Information for the SFTI can be accessed here: http://www.arb.ca.gov/gmp/sfti/sfti.htm.)

The previous incarnation of the SFTI outlined several concepts encouraging “sustainability” in the freight transport network. Without going into detail, suffice it to say the overall tone for the transportation sector had a strong push to zero emissions wherever technically feasible. They also have an eye on in-use emissions performance of existing engines, enforcement enhancements and potential cleaner standards for new engines sold in California. See more here: http://california-air-quality.blogspot.com/2015/04/back-from-drawingboard-carb-releases.html

 Several concepts are being thrown around in these early stages, however, one proposal in particular rings as a harbinger for future controls of on-road compliant equipment; the so called “facility cap” may potentially force covered facility operators to require the cleanest equipment available in order to access the facility. See more here http://california-air-quality.blogspot.com/2015/05/sustainable-freightplan-part3-of-3.html  

While all strategies are generally outlined in the plan, there have been no concrete proposals besides suggestions for regulatory measures coupled with incentives that will push towards their goals. The plan is slated for release in July; directly in line with the Governor’s Executive Order requiring an integrated freight strategy that sets clear targets for a transition to zero emission technology. http://california-air-quality.blogspot.com/2015/07/executiveorders-government-efficiency.html

Along with the zero emission strategy, the Governor has also proclaimed a need for strategies to increase freight industry efficiency while maximizing the competitiveness of California’s freight system. To this end, CalTrans, opened a solicitation for public input to identify freight pilot project ideas in California that ensure progress towards a sustainable freight transportation system.

While some creative concepts will no doubt emerge from the 53 some odd proposals they received before the November 30 deadline, one thing is for certain; the freight transport network cannot function without heavy duty vehicles, no matter how badly everyone wants to shift cargo from truck to intermodal rail.

And while Governor Brown has long abandoned his “small is better” approach in engaging the administrative might of several agencies in this ambitious plan, the economic and engineering implementation realities will no doubt rear their ugly heads to squash many of the concepts that will surface from the depths. It is possible that the proposals may be of more interest to folks who appreciate science fiction and fantasy, or macabre technical specification manuals rather than those who will be doing the regulating.

Regardless of public input or opposition or support for that matter, the Governor is moving forward and will hold his agencies accountable for a draft plan by July. Not coincidentally , CARB will  release the State Implementation Plan for Federal Ozone compliance during the same month. The two will no doubt be intertwined from the ground up when it come s to control of Ozone resutling from the transportation sector. This will include in-use mobile source control measures, a facility cap, new engine standards and in use engine emissions performance criteria just to name a few.

Stay tuned. Much, much more to come.

Got Financing?

Government Guarantee Financing for Clean Truck Purchases  

In California, most trucking fleets have become accustomed to the robust lexicon of regulatory measures which have resulted in billions of capital outlays to meet air quality standards. It has been argued that currently, the California based Heavy-Duty trucking fleet is the cleanest operating fleet in the world. The sour smell of uncontrolled diesel emissions is a thing of the past in the Golden State and citizens should thank fleet operators for this clean air reality.

This reality, of course, has not been without major challenges. Many fleets have handed in the keys because they can no longer afford to stay in business. While many more have seen the value of their retirement assets dwindle into something resembling a Madoff managed retirement account.

Beyond California, the Federal Government has been slowly implementing stricter engine efficiency and emissions controls dating back to the 1990’s; mostly driven by California. These Engine standards are a steadfast requirement that Original Equipment Manufacturers (OEMs) must meet in order to make an engine for sale in the United States.

The current and future Federal standards, affectionately referred to as the Phase 1 and Phase 2, are the latest reason for the astronomically high costs of new, heavy-duty trucking equipment. While Phase 1 standards increased per truck costs by more than $6,000. Cost increases for Phase 2 standards may reach up $13,000 per truck.  And of course, the higher the cost of the new truck, the higher the cost of that same truck in the used truck marketplace. 

Outside of limited incentive funds, fleets, whether they know it or not, may be eligible for government guaranteed financing programs that can help manage cash flow through lower down-payments and longer terms with both fixed and adjustable interest rates. The longer term financing, up to 10 years in some cases, provides operators with a lower monthly payment, which helps to conserve cash for working capital to create jobs and expand operations.

In California, the California Pollution Control Finance Authority and the California Air Resources Board offer a truck finance program to a limited pool of eligible fleets.  The program, known as the CalCAP On-Road Loan Program restricts eligibility to fleets with 10 or fewer trucks over 14,000 pounds Gross Vehicle Weight Rating (GVWR).  To qualify, fleets must agree to purchase 2007 or newer engines and adhere to California travel thresholds. CalCAP has a maximum interest rate of 20% and provides loan coverage for 10 years. However, few, if any lenders offer the 10 year term on equipment purchases, while 20% rates are more common than one would think.

Nationally, the U.S. Small Business Administration (SBA) 7(a) loan program maintains no fleet size restrictions, no travel restrictions and interest rates are capped at a much lower maximum.  Using current rates, customers would see a 6% cap for floating rates and an 8% cap for fixed rates.  For many fleets, obtaining capital at these costs may not be a reality, with SBA the reality is not only available, but achievable.  

In order to qualify for SBA, fleets cannot have a tangible net worth that exceeds $15 million or average net income (based on Federal Income Tax Returns) greater than $5 million over the past two years. And although many in the trucking industry would describe their business as “non-profit”, SBA requires the applicant to be a for-profit business entity, so no churches or other not-for-profit endeavors.  

One great feature of SBA is the tremendous flexibility how loan proceeds may be expended. Loans may be used for equipment, business-occupied commercial real estate, business acquisition and working capital for business expansion. Generally, 95% of US businesses qualify, and for eligible transportation businesses, the SBA program may offer the perfect opportunity to offset the rising costs of clean equipment by helping fleets manage capital expenditures with lower down payments and longer terms. And with a maximum loan amount of $5 million, the SBA 7(a) program will also help fleets ensure that no matter how expensive meeting the clean air standards gets SBA can help.  And in the ever evolving realm of Air Quality standards, fleets need all the help they can get.

Contact Crossroads Equipment Lease and Finance at 1-866-465-0181 for more information on SBA or CalCAP.

 Matt Schrap is VP Government Programs for Crossroads Equipment Lease and Finance and President of California Fleet Solutions he can be reached at mschrap@cafleetsolutions.com

Disconnected

EPA and NHSTA hold public Workshop to Discuss Phase 2 Engine Standards

EPA held their second hearing on proposed truck fuel efficiency and greenhouse gas emissions in Long Beach on the 18th of August.  According to many observers the second hearing had the same script as the first with industry calling for a more pragmatic approach while environmentalists and regulators screamed for accelerated standards.

For the end user, many of these standards are so far in the future it is hard to come to a concrete conclusion on how the standards will impact their day to day lives. Since there is only one state with in-use requirements, there is nothing mandating the purchase of the proposed equipment. The main impact for the end user is basically higher costs for equipment combined with promises of fuel savings from regulators.

The public comments were quite heavy on the demonization of the industry. Many accused trucks of causing asthma and cancer, blaming them for the air quality woes plaguing the nation. Here in California, unlike everywhere else, there are in-use requirements for Heavy Duty Engines, so some of the criticisms were a little misplaced.

Outside of a select number of ports in other states, California has gone it alone and directly sought cleanup of the in-use truck fleet. Nevertheless, the public workshop gave an opportunity to anyone who was interested in coming out to air their concerns about the upcoming engine standards.

Unfortunately, what was lost on most of the folks in attendance is that these standards are not a mandate on end users, but are a mandate for engine and equipment manufacturers to meet specific efficiency levels. Some even speculate that with additional requirements, end users would not purchase the new equipment, holding on to older, more polluting trucks for longer.

California wants to see implementation accelerated and to require a more stringent efficiency push out of the engines. Claiming billions of gallons of fuel savings, CARB  is also seeking a stricter NOx standard and has made effort to make sure everyone knows this fact.

The engine only standards that are currently being proposed are leaving the OEM’s in a bind. With the current proposed standards the famed “super truck” wouldn’t even qualify. The industry wants a complete vehicle standard, which looks at the total vehicle package and how the engine operates within the vehicle. This is a pragmatic approach that would allow for standards to be based up on real world applications. The engine only standard looks at how the engine is performing. Either the engine meets the standards as laid out in test procedures or it doesn’t.

In California, the regulatory regime requires several in-use engine standards to be met by the industry. The challenge with new engine standards, beyond the increasing costs, is the possibility of a pre-buy or no buy at all, forcing some states to go the way of California and begin a forced turnover mandate to meet theie air quality goals under the Clean Air Act. 

Regardless, the wheels of the EPA are turning and the industry can expect stricter new engine controls in the very near future. A complete vehicle standard would make the most real world sense but the burning question is whether or not California will seek their own standard or if the feds will bend under pressure from CARB and go with a single low NOx standard for the entire nation. Time will tell. 

Stay Tuned!

Matt Schrap is President of California Fleet Solutions and VP Government Programs for Crossroads Equipment Lease and Finance.

 

 

Executive Orders & Government Efficiency

No Longer Mutually Exclusive

Last Friday, while still glowing from the light of his papal encounter, the Governor issued an executive order directing his agencies to work together toward a zero emission future for the freight transport network in California. While this should be no surprise to anyone who has been paying remote attention to what has been happening in the golden state, it is still a relative shock to the Goods Movement system and those who exist within it.

California has always been the most progressive state when it comes to environmental protections. Elected officials and the public at large have never shied away from tighter environmental standards whether originating from the floor of the legislature or through the initiative process. The electorate has on more than one occasion indicated their support for environmental stewardship; directly rejecting efforts to water down existing standards, whether it be directed at land, sea or air.

Prior to last week’s Executive Order, CARB was plugging along on their own progressive vision for the freight network, throwing almost everything within the network at the wall to see what stuck.

CARB released their draft sustainability plan for the freight network earlier this year; it looks to every mode of the goods movement system for reductions (See  "Back from The Drawing Board" series ). For the trucking sector, this not only means additional reduction measures, but something that CARB has little if any experience in, efficiency mandates.

Despite the fact that the term government efficiency typically elicits laughter, efficiency is exactly what the government is getting into. Not their own efficiency, mind you, but the effort will involve mandating efficiency measures in the freight transport network that will reduce unnecessary truck trips or at least attempt make the moves more efficient.

Little, if any specifics have been made available on what these measures are. And besides a brief mention of technology, the right turn only route planning for UPS and other existing programs such as PierPASS in the ports of Los Angeles and Long Beach, there is little the industry can look to for an indication on what the heck CARB is planning on doing.

What is of some concern is that although the PierPASS program has been successful in shifting cargo to night gate moves, the same exact inefficiencies exist at marine terminal gates at night that do in the day. Although cargo moves were shifted, PierPASS did nothing to address the extended waiting times that drayage drivers suffer through each time they show up at a gate day or night.

If CARB seriously wants to address some of the system inefficiencies that have plagued the industry for years, there needs to be a deeper examination of what exactly are the underlying causes of system inefficiencies. It can’t just be a surface skim effort that reincarnates existing programs to move cargo off peak hours. It is never that easy.  

While the welcoming sunshine from the Executive Order will illuminate the shadowy work CARB has been doing on the sustainable freight plan, it is an obvious and direct order to those would be the carriers of the children’s future that the Governor means business.

The moonbeam will be shining bright through 2018, so there is a whole heap of time for him to force regulatory measures up and down the supply chain. Hopefully, the efficiency endeavor will bear real fruit and not just more lip service. We have all had enough of that.

Stay Tuned!

Matt Schrap is President of California Fleet Solutions and VP Government Programs for Crossroads Equipment Lease and Finance.

CARB Provides No Quarter for After School Program

Boys and Girls Club Fined $14,500 for PSIP & Truck and Bus Rule Violations

If folks in the golden state and across the country haven’t caught on to the unrelenting regulatory authority of CARB, it is high time to wake up and smell the low hanging fruit. 

Tens of thousands of dollars in fines are currently being assessed for non-compliant trucks across the great expanse of California. It should be no secret that several rules require diesel powered fleets operating in the golden state to meet standards or face penalties.

The turnover and retrofit standards under the Truck and Bus rule and the annual testing requirements of the PSIP are a single component in the host of conditions heavy duty truck operators must adhere to in order to remain above board.

Many fleets can attest to the fact that once a citation is received a cascading aftereffect results. Once an operator is cited there is a limited window to not only pay the fines but also secure new equipment to meet the standards.

Typically, enforcement actions are the result of referrals, information requests or in-field inspections, no matter which way it happens, the results are the same. Once CARB finds a non-compliant vehicle, it sets off a chain of events that eventually leads to a compliance audit for other CARB programs.

The settlement agreement between the storied after school program founded in the 1830’s and the barely 40 year old Air Quality agency surrounds their school bus fleet and the lack of  data for the periodic smoke inspection program (PSIP) as well as non-compliance with the Truck and Bus Rule.  

The PSIP program  requires fleets of 2 or more to annually test smoke opacity for trucks over 6,000 pounds GVWR  equipped with engines that are over 4 years old (SEE March 23, 2015 Posting:   Where There's Smoke, There's CARB ).

The Truck and Bus rule has been on the books since 2008 and requires fleets of all shapes and sizes to meet in-use standards or face penalties. Turnover and retrofit requirements impact any diesel vehicle over 14,000 pounds GVWR, this includes tractors, straight trucks, street sweepers and school buses, to name a few. (SEE June 5, 2013 Posting: CARB Conundrum )

While it appears that CARB has given the Boys and Girls Club some consideration for previous violations, the non-profit will only have 45 days to demonstrate full compliance with the Truck and Bus rule or potentially face additional fines for missing the deadlines.

Many compliant carriers may wonder why CARB is pursuing non-profit organizations instead of the “bottom-feeders” who have skirted CARB requirements and depressed rates for years. The simple answer is no one is safe.

A quick read of settlement  summaries on CARB's website will show a host of hefty citations that have have been levied against small and large business alike. Rumor has it that several major settlements will be concluded soon, totaling millions of dollars in fines. In  fact, just recently a massive half million dollar settlement was inflicted on a Central Valley carrier for non-compliance (SEE February 18, 2015 posting   Truck Fleet Faces $523,675 Fine for Non-Compliance with CARB Rules ).

To their credit, CARB has always stated that they will work with carriers who are making an effort to comply, and all evidence so far indicates a willingness to discuss the particulars of any individual case; the Boys and Girls Club settlement agreement is no exception.

Nevertheless, this should a blatant indication that CARB means business, and that their latest stepped up enforcement efforts are in fact bearing fruit (low hanging or otherwise).

It is just a matter of time before they weed out the remaining non-compliant fleets resulting in an open landscape for those equipment operators who are committed to a clean air future…or, at least staying in business.

Stay Tuned!

Matt Schrap is President of California Fleet Solutions and VP Government Programs for Crossroads Equipment Lease and Finance.  

More Isn’t Always Better

EPA to propose stricter Phase 2 GHG Standards for new HD engines

There seems to be little respite for the heavy duty trucking industry when it comes to emissions reductions in this day and age. While California toys with the idea of a zero-emission, all-electric fleet, the Feds have again thrown down the gauntlet in their efforts to squeeze  additional Greenhouse Gas (GHG) reductions from the heavy duty trucking fleet via “Phase 2” new engine standards to take effect in 2018 with full implementation in 2027. 

While some regulators and politicians have described the industry as a “necessary evil”, industry members themselves are passionate defenders of their work, pointing to the fact the vast majority of Americans would be “naked and starving” if the trucking industry stopped moving.

Of course, no one in the industry wants to stop moving and they especially don’t want their customers naked or starving.  That brings us to a crossroads; the economy needs the industry to help maintain and grow economic activity and the industry needs a strong economy to maintain and grow the industry, it is a symbiotic relationship. As goes trucking, so goes the economy. The industry is the proverbial canary in the coal mine when it comes to the economic health of the country.

So a healthy trucking sector is a good thing, for everybody. There is a concern that as the cost of doing business rises, especially in relation to new and used truck prices, fleets will need to become more efficient to compensate for higher costs in order to remain competitive. Today, every model year new truck prices go up approximately $3,500, a new truck that would have cost $84,000 15 years ago now costs upwards of $120,000.

Although inflation and peripheral costs related to manufacturing contribute to this increase, the main culprit is the complicated engine emissions controls that are found on every new heavy duty engine (HD) and really every HD engine built since 2007.

Profit margins are near razor thin in trucking; regulations are everywhere and costs are only going up. These EPA proposed efficiency mandates are appreciated in the abstract, but are doing nothing to stop the upward trend of truck prices happening today.

For the industry, the assumed future cost savings of increased efficiency across unique sectors is a tough pill to swallow, especially when it is coming from the same folks who are doing the regulating. They, along with a host of environmental groups claim the higher equipment costs will be made up in future fuel savings. Future savings do nothing to lower upfront costs. Somebody has to pay.

The reality is, as has been evidenced here in California, the general public doesn’t want to pay more for the goods and services they consume, and the shippers and cargo owners do not want to pay more for the goods or services they produce or provide. 

When a trucking fleet is faced with higher costs of doing business (high cost of equipment, fuel, workman's comp, payroll, etc…) more often than not, to keep existing customers or attract new ones,  fleets will to operate at a loss to maintain that business relationship or  perhaps build new ones.

Shippers and cargo owners do not give rate increases out of the goodness of their hearts.

In California, the trucking industry has been mired in a regulatory cyclone with emission control requirements for their engines, efficiency upgrades for their trailers, stricter engine standards for their refer units, requirements for forklifts, as well as off-road yard hostlers, underground or above ground storage tanks and even portable and stationary generators.

The costs of upgrading for these rules have been bore by the industry alone.

Complicating this matter is the fact that customers are reluctant to pay a higher rate to one carrier for a California move when another down the street (or out of state) can do the same haul for cheaper. Since they do not face the same costs, either because of size,  scope or their “inability” to meet imposed in-use emissions standards,  a lower freight rate can be charged.  Nevertheless, these cost discrepancies not only stem from ability between fleets to meet air quality rules, but also from the general business climate in California (which in and of itself is a whole other topic).  

For national fleets operating outside of the Golden State, and other out of state fleets who vow to “never, ever, ever, over my dead body” enter California again, the only emission control technology they are subject to is the kind that comes from the factory in the form of a new truck engine.

Outside a select number of ports, the US trucking fleet does not have California-like turnover or control standards requiring cleaner in-use operation. While some states such as Oregon examine potential rules, California remains the only state with emissions standards for in-use HD vehicles.  

For California, this is not the first time at the dance. The in-use California only truck standards were preceded by separate California only diesel fuel standards as well as stricter control levels for new engines sold only in California and other opt-in states.

While California still maintains the designation as a “fuel island” because of CARB Diesel #2, the California only engine controls eventually spread to the entire country via Federal decree after everyone from the Engine Manufacturers to EPA to CARB were done suing each other, well sorta.   

Suffice it to say and putting it mildly, over the years California has helped drive Federal engine standards. The resulting engine standards for 2007 and 2010 model year were primarily geared towards criteria pollutants such as Particulate Matter (PM) and Oxides of Nitrogen (NOx). Lately, the Feds have started to move beyond criteria control towards efficiency upgrades for GHG reductions.

The Phase 1, GHG/Carbon Dioxide (CO2) thresholds for 2014 through 2018 engine model year standards required up to a 20% efficiency improvement for combination vehicles. The next phase, Phase 2, includes an additional 20% efficiency improvement through 2027. That equals a 40% increase in fuel efficiency over 2010 standards.

This type of mandate typically results in millions of dollars in R&D leading to sophisticated technology adoption, all resulting in higher costs to the end user with the usual promises of future savings.

The industry will always look towards any cost savings that helps maintain competitive rates while lowering the cost of doing business. But in an industry weary of promises for newer, cleaner, technology that will pay for itself in no time at all, full end user buy-in requires more than just lip service.

When struggling to survive as a for hire motor carrier, dollar and cents matter. More expensive trucks are just that, more expensive. Grants, potential tax incentives and creative financing can all help offset these higher costs, but for the small to mid-size carrier that is easier said than done.

So if the technology can actually deliver real world savings, fleets will adopt it. The Feds are seeking to reduce fuel consumption of HD engines, and since fuel is the number one cost for fleets, any little bit will help, especially since there are other costs that go beyond annual emissions escalators for new engine standards.

The proposed future savings may be lost in required maintenance procedures for complicated technology that may potentially be more prone to failure, resulting in down time and lost revenue for fleets. In the “just-in-time” freight network, if a delivery is missed because of a truck breakdown, carriers can usually expect to not carry that load for that customer again.

The durability of emission control technology is not a new concern. Hopefully the Feds will recognize the major investments fleets will be making into the 2027 standards and provide manufacturers enough flexibility to meet the requirements without sacrificing product quality just to meet imposed thresholds.

All in all, the quest for greater efficiency is a worthy endeavor; it must however consider the real world challenges of Heavy Duty Truck operation and effort towards a measured approach to implementation while avoiding impediments to implementation.

Unfortunately, once such impediment towards greater efficiency may come from the same state that started the ball rolling on new engine emission controls in the first place. California always has something to say if the Feds are considering Heavy Duty (HD) engine standards, this is no different.

In the recently released Sustainable Freight Plan, CARB has boldly lain out a strategy to request stricter NOx controls for new engines manufactured for sale in the US. They make no bones about their willingness to pursue a California only standard if the Feds do not act, both on the Phase 2 standards and the new California lower NOx proposals.

There is precedence for California only engine standards and whether the industry will need to suffer again through 49 and 50 state engines remains to be seen.

Nobody wants a California only rule, not the Industry, not the Feds, not even California. So, the Feds will have their work cut out for them, especially if California forces the mandate of lower NOx standards.

The bottom line here is that although regulators and environmentalists point to future cost savings from more efficient engines, the annual up front cost escalations for emissions controls in new heavy duty trucks are pinching an already squeezed industry. And with the Golden State cultivating their low NOx vision through federal action, things can only get more complicated from here on out.

And, it is quite possible that as costs continue to rise, small independent trucking companies will find themselves behind a wall of debt unable to pass on cost increases while waiting ever patiently for the fuel savings pay back promised by the very regulators who put them in that precarious position in the first place.

Stay Tuned!

Too Much or Not Enough?

CARB’s Sustainable Freight Plan Using Old Numbers to Mitigate New Risks

It should be no secret by now that the entire freight transport network is being looked to help secure California’s low carbon future. Although energy production and light duty vehicles constitute a hefty portion of carbon emissions in the golden state, CARB is looking to the freight network to squeeze out every reduction they can on the path to this lofty goal. CARB will beg, borrow and sue their way to the vision they have laid out in the SFP, seeking to save California from itself, one step at a time.

Their vision however, is not without its detractors. More than one major trade organization has raised concerns with the freight growth forecasts that CARB is using to justify their ambitious emission reduction plans contained in the SFP. With rosy freight estimates based on high growth years prior to the Great Recession, CARB is basically using outdated projections to plan for future programs aimed at offsetting emissions from growth that will not be realized in their time frame or possibly ever.

Although the agency has entertained the thought of using revised cargo estimates to update their plan, they have given no indication that they will be easing potential restrictions on facilities that are located near sensitive receptors or in areas with high cancer risk from toxic air quality exposure; more on this in a minute.

Historically speaking, CARB has typically changed their tune if they find emissions estimates are clearly inflated. The Off-Road regulation got an overhaul after it was discovered that the load factors being used for estimating in use emission were significantly exaggerated. And the truck and bus rule received a tune up once it was clear that the recession was having a severe impact on truck activity directly leading to lower emissions during the economic downturn. 

Although there were some questions regarding the useful life and mileage accumulations CARB was using to justify the entirety of the on-road regulation, the rule was significantly modified to account for real, current economic and environmental factors that couldn’t be ignored. 

There are other examples of CARB using new data to modify existing and proposed regulation, especially when they have underestimated emissions. But, suffice it to say, CARB never has come to a regulatory roll back conclusion by themselves.

The industry has always been quick to point out flaws in CARB’s analysis when it comes to major emissions reduction measures. More often than not, industry claims are brushed aside in the name of protecting public health, leaving industry an open invite by staff to basically camp out in the CARB library to directly investigate the sources used in the development of the regulation, but not much else.

This tactic amounts to providing all the ingredients of the “whole enchilada” but not the cooking temperature.

Nevertheless, if there is an obvious flaw in their data (such as using 10 year old cargo estimates that were 43% higher than actual cargo volume for major California ports in 2014), CARB has no choice but to acknowledge and adjust as necessary.

Unfortunately, even with reduced cargo volumes, the revised methodology of carcinogenic risk from Office of Environmental Health Hazard Assessment (OEHHA) that was used in the South Coast AQMD  Multiple Air Toxics Exposure Study  IV(MATES-IV) Click HERE  indicates that previous toxic air exposure and subsequent cancer risk numbers  are significantly higher than previously estimated.  In all likelihood, these higher exposure numbers may offset any potential reductions in freight emissions from revised cargo volume estimates.  (See maps below)

Regardless, the freight movement industry should stay engaged and encourage CARB to take a hard look at their growth estimates; after all, sound public policy is supposed to be grounded in some tangible reality, even in California.


Stay Tuned!   

 

Back from the Drawing Board - CARB Releases Sustainable Freight Plan

Part 3 of 3: The Facility Cap

There isn’t much the regulatory regime in California can do anymore to surprise businesses and fleets operating in the golden state. But the CARB Sustainable Freight Plan (SFP) comes staggeringly close.

Beyond enforcement enhancements, federal or California-only new engine standards, zero emission mandates and potential efficiency metrics, one of the most controversial measures CARB is considering under the SFP is the so-called facility cap.

Although it is here, it is real, and it means business, fleets have been reluctant to dive head first toward the zero and near zero emission future CARB has laid out in this plan. Currently, zero emission heavy-duty equipment offerings are limited at best. Technology that is in development has yet to prove itself in an actively competitive and commercial environment.

The SFP is seeking to resolve this situation; CARB’s strategy is to encourage adoption of this emerging technology through incentives and regulatory measures – or as it is technically designated – the carrot and stick approach.

The SFP is multi-faceted. It is a framework that outlines several strategies for potential incentives (carrot), as well as regulatory development and forced behavioral modifications (stick).

Distribution centers, warehouses, airports, seaports, and quite possibly truck stops and other locations that attract heavy-duty trucks may all find themselves policing truck traffic and implementing other reduction measures to remain under imposed emission caps. It is very likely that the primary behavior that facility operators will need to change is the way they monitor their daily ingress and egress of trucks.

If emissions exceed the cap for any given time period, the facility may face fines. The fine structures will more than likely be based on information derived from audits of data that the facility will be responsible for managing (e.g., number and emissions profiles of trucks, TRU’s and TBD’s). 

 

This will force the facility to closely monitor traffic and quite possibly turn trucks away at the gates if it is determined the facility is close to an established cap.

While no one wants to turn trucks away at the gates, it is possible that a PM retrofit may not be enough to enter into a facility if that facility is struggling to maintain levels under the cap.

A close read of this concept shows the underlying, back-of-the-hand objective in the SFP; forcing covered facility operators to require trucks that enter their property to meet the lowest emissions standards available.

It is assumed that shippers will gravitate toward fleets that operate the cleanest equipment, possibly those that use alternative fuel, hybrids, or at minimum 2010 diesel engines. The clean trucks will give shippers assurances that their motor carriers will be able to enter distribution centers to drop off or pick up cargo without incident.

It is also possible that facility operators may impose a fee if a “dirty” truck is needed to pick up cargo from a covered facility. It worked in the ports of Los Angeles and Long Beach with the clean truck fee under the Clean Air Action Plan (CAAP), so why wouldn’t it work everywhere else?

Granted, this is a developing process. CARB has indicated that they will be first looking to facilities located in parts of the state with the highest health risks.

Areas such as parts of San Bernardino and Riverside counties, the ports of Los Angeles and Long Beach, and Central Los Angeles have been mentioned more than once in planning documents released by CARB and the South Coast Air Quality Management District (SCAQMD).

Other parts of the state with high health risk areas such as the Port of Oakland and parts of the Central Valley are also in the facility cap crosshairs. Most large metropolitan areas have highly sensitive receptors in many parts of their regions. For decades, the state has sought policies to help protect these communities from harmful toxic air exposure. Most, if not all air quality improvement measures have been adopted to offset these side effects. In this sense, the facility cap is not a new concept.

The SCAQMD and the State of California have wanted to go after facilities as “diesel magnet sources” (i.e., facilities) for quite some time. Whether it is through a cap based on facility emissions, a cap based on units of freight activity or a cap based on facility cancer risk, the outcome is the same; facilities will be capped. Rest assured, business as usual is changing. The State of California will not relent until the freight transport network folds under pressure or ends up saving us from ourselves.

C&C will be back with more on the SFP. Stay tuned!

Back from the Drawing Board - CARB Releases Sustainable Freight Plan

Part 2 of 3 – ZEV Mandate

The Sustainable Freight Plan (SFP) is a comprehensive approach to reducing emissions across the entire freight sector. While ocean going vessels and locomotives are also being looked at for reductions, trucks are at the forefront of CARB’s diabolical scheme to regulate the heck out of everything they can.

Whether it’s back door or straight through the front, CARB will reach every mode of the transportation sector with the SFP. Their position is that in order to meet federal air quality guidelines and protect public health, they need to transition the trucking fleet into zero emissions and near zero emissions across most sectors.

The trucking sector is no stranger to the whims and fancies of CARB, but the SFP is some next level stuff. Right as the industry thought they were out of the woods with the on-road truck and bus rule – once it was finalized (again) last year – another set of regulations is headed down the pike. It turns out, the light the industry saw at the end of the tunnel was actually a train headed right for them.

CARB will start small; drayage trucks, short haul delivery, urban delivery, and recycle transfer trucks are all up first on the chopping block. They will then move to the larger over-the-road industry once there is an actual engine and infrastructure available to meet their “vision.”

In the urban delivery sector, CARB is not only seeking to set efficiency standards to accelerate Zero Emission Vehicle (ZEV) demonstration projects, but they are also looking to mandate ZEV according to fleet volume or vehicle size, beginning with last mile delivery vehicles. 

CARB on more than one occasion alludes to the fact that complementary incentives will be available to assist in deployment of this technology. Nevertheless, with limited technology offerings currently available, it will be hard to convince fleet operators to shift platforms into commercially untested equipment, even if CARB is throwing money at the problem.

This approach is consistent across all the sectors that CARB is seeking to regulate. Short haul and transfer trucks are dead center in the ZEV crosshairs with Zero Emission Vehicle mandates being proposed along with the complementary incentives for vehicles and infrastructure. There is also consideration of a pilot project for long haul trucks that would encourage zero emission travel and idling reduction strategies in impacted communities.

All in all, CARB is looking at a wholesale change of the freight transport network. Although there are limited available equipment offerings for the trucking sector, the agency is moving full steam ahead toward consideration. And despite the enormous technological and economic challenges, the trucking industry can expect more of the same from our favorite four letter agency.

Next up in C&C, the dreaded “Facility Cap” will be reviewed. The Facility Cap is the crown jewel of the SFP and will touch practically all facets of the freight transport industry…be afraid, be very afraid.

Stay tuned!

Back from the Drawing Board - CARB Releases Sustainable Freight Plan

Part 1 of 3 - CARB Enforcement Enhancements

The highly anticipated Sustainable Freight Plan (SFP) hit the streets last week. In it, CARB outlines their vision for the future of the freight transport sector in California. The document describes actions  covering trains, trucks, ships, distribution centers, forklifts, refrigerated units,  airport shuttles and transit busses, to name a few. 

The document is in draft discussion form and will be presented to the Board next week in Sacramento on the 23rd. Although there are no specific details on how each emission reduction measure will be carried out, it is clear from the document that CARB is quite serious about this plan. They consider it the touchstone of emission reduction efforts from the freight transport sector, now and for decades to come.

While details are still being refined, facility operators and trucking companies should be prepared for a wholesale change in how they conduct business in California.  In the SFP, the trucking sector is the most comprehensively covered entity; and since the trucking sector is the most regulated entity when it comes to CARB in general, it would seem only fitting that efforts to enhance enforcement of existing programs would be the first order of business. It would be disingenuous of the agency to propose a host of new regulations without getting a firm grip on the ones that are currently on the books…right?

It is no secret that many carriers in California are unimpressed with CARB’s enforcement capability. This mindset is only encouraged after hearing directly from CARB staff that their enforcement capabilities are, well…limited. Out of state carriers are even less impressed, leaving the in-state carriers to wonder when or where they might ever run into a CARB enforcement team.

 

The SFP is a harbinger of the changing tides; the “businesses as usual” perspective will no longer be the norm. With a limited number of in-field enforcement personnel at its disposal, CARB makes no bones about their number one enforcement referral being the industry itself; which allows them to target and prioritize fleet audits depending on severity and number of industry complaints. 

The SFP is seeking not only to add to the overall number of inspectors, but also seeks to reassign existing enforcement personnel to focus their efforts at or near truck stops and freight hubs such as seaports, intermodal rail yards and distribution centers.

CARB is also seeking partnerships with USEPA Region 9 and local jurisdictions to enhance enforcement efforts; local district personnel will be charged with enforcement of CARB standards within respective jurisdictions and will be able to issue citations as they encounter non-compliant carriers. USEPA region 9 personnel will be utilized to go after out of state carriers who are violating current rules.

Beyond additional personnel and targeted local and national enforcement, CARB is also proposing a strategy to go after sizable carriers and brokers, with the thought that these enforcement actions will then encourage smaller fleets to come into compliance with existing regulations. Since carriers and brokers are responsible for confirming compliance, many small fleets and contractors may find themselves in an enforcement audit resulting from a broker citation (See “Skin in the Game” http://california-air-quality.blogspot.com/2013/07/skin-in-game.html).

It is clear that the SFP is a serious effort to change the future of freight transport. In the next installment, C&C will cover the proposed low NOX, Zero and Near Zero Emission mandates that are being proposed. Folks must remember and understand that in CARB’s world, “regulate it, and it will come” (regardless of limited technology availability) is a mantra that is not going away…

Stay Tuned!

http://www.arb.ca.gov/gmp/sfti/Sustainable_Freight_Draft_4-3-2015.pdf

Where There’s Smoke, There’s CARB

CARB Citations on the Rise Across the State

 

To many in the transportation industry, CARB has become the four letter word of the regulatory regime here in California. While concerns over CARB’s unchecked power reside primarily on the republican side of the legislative isle, the air quality agency has been steadfast in the enforcement of their rules with little if any, effective pushback.  CARB has enforcement authority over everything from lens cleaner to lawn mowers, anything that may potentially impact air quality.

The Health and Safety Code gives CARB the ability to issue fines of $10,000 per day if existing rules are violated. Although no one in the trucking industry has experienced a fine of that magnitude, the current minimum fine of $500 per month, per truck that is out of compliance can add up faster than green grass goes through a goose.  

With more and more folks needing to navigate the enforcement labyrinth as of late, word has begun to spread to most corners of the state that CARB is out in the field issuing citations. When a fleet is issued a citation, if it is correctable, like a missing Emission Compliance Label (ECL), the fleet can correct within a specified time period after paying the fine and that is the end of it. What the in-field citation may trigger however, is a fleet audit. For multiple truck fleets, one citation can bring down the house (See February 18, 2015 Post:  Truck Fleet Faces $523,675 Fine for Non-Compliance with CARB Rules ).

Once an audit is initiated, a fleet should immediately start taking corrective action, or begin to build a case for why the standards could not be met. CARB will potentially request (among other things) hundreds of dispatch and registration records along with proof annual smoke testing and ECL compliance. It is up to the fleet to provide these records in a timely fashion or the fines will go up dramatically.  

Once a fleet receives their violation schedule after the audit, CARB will outline what was violated and when. It is imperative that fleets look closely at the citations to make sure that they are accurate. Since CARB enforcement auditors are only human, there is always the potential for a mistake.

 

What CARB will present with the violation schedule is a “settlement agreement”. This agreement outlines what laws were broken and what CARB is willing to settle on in lieu of taking a fleet to court. Typically, the fines are reduced, but many other strings are attached, including annual reporting and participation in diesel technology education classes.

If a fleet doesn’t want to agree to the settlement, then CARB will take them to court and seek the maximum penalties. To say the least, the threat of “$10K per day” is enough to encourage settlement in most, if not all cases.

The most surprising statistic from CARB enforcement reports is that many fleets are still being issued tens of thousands of dollars in citations for failure to annually perform a simple $40 +/- smoke test. The PSIP, or Periodic Smoke Inspection Program, requires all fleets with two or more trucks based in California to perform annual testing on any engine over 4 years old. Fleets are required to maintain two years of test data. If data is missing, a fine of $500 per truck, per year is issued. For a 2 truck fleet this may only equal $2000, but considering that fine could have been avoided entirely with $160 in test charges, one is left to ponder if avoiding the potential inconvenience of a 10-20 minute test was worth it?

The PSIP is the highest grossing in-use diesel truck regulation on the books and it is probably the easiest rule to comply with.  Fleets should be cautious when thinking that CARB rules may not apply or CARB enforcement will never catch them, it could end up costing more than a slight inconvenience.

Stay Tuned!

If you need help with CARB compliance or enforcement, email Matt at mschrap@cafleetsolutions.com

No Good Deed Goes Unpunished

Clean Truck Lease Backs Still Under Scrutiny

When the Clean Air Action Plan (CAAP) came into effect in 2006, motor carriers operating in the Port of Long Beach (POLB) and Port of Los Angeles (POLA) were faced with a ultimatum; upgrade to clean equipment or find a new line of work.

At the time, most independent owner operators (IOOs) hauling for these motor carriers were driving what was then deemed to be non-compliant trucks equipped with dirty, uncontrolled diesel engines. Without retrofits and eventually a 2007 model year engine, these vehicles were not allowed to enter into POLB or POLA after the progressive truck ban under the CAAP was implemented.
 

Motor carriers needed to completely change their business models and purchase their own trucks driven by employees, or help their IOOs get into newer vehicles so they could keep hauling. Both options left much to be desired.

Although the POLA tried to help carriers make the choice by attempting to force out the owner operator business model, carriers sought creative strategies to help their IOOs while attempting to maintain the contractor model. Everyone in the industry saw the writing on the wall – a truck ban was going into effect and little could or would be done to stop it.

With few other options, the industry responded, and since then the ports have recorded unparalleled emission reductions, primarily due to the replacement of older, highly polluting diesel engines by much cleaner diesel and natural gas trucks.

Today particulate matter emissions at the ports have dropped 80-90% below the levels measured in 2005. Nevertheless, there looms the possibility of a second truck turnover requirement. With the South Coast AQMD looking at everything from backyard BBQs to burger joints for emission reductions in the region, there is little likelihood that the 2007 diesel engine will continue to be eligible for port service in the San Pedro Bay ports over the next 5 years.

There is also a very good chance that California and the rest of the country will be facing stricter ozone standards, precipitating a need for additional reductions. And with a limited tool belt for local regulators seeking to control mobile sources of pollution, the ports serve as a proven medium for a simple solution regardless of how the ports themselves feel about it.

The emissions requirements within the original CAAP were based state law adopted in 2005. Specifically, the California Air Resources Board (CARB) Drayage Truck Regulation section 2027 that covers every maritime port and intermodal rail facility within 80 miles from a maritime port. The regulation allows local jurisdictions to pass stricter laws within the regulatory framework of the Drayage Regulation, which is exactly what LA and Long Beach did, going above and beyond the statewide standards and requiring the 2007 engine two full years before the statewide plan.

No industry group had enough political will or capital muscle to stop CARB from passing the Drayage truck rule in 2006 and when POLB and POLA tightened the standards and created a separate regulatory structure under the CAAP, the industry was so concerned with the ban of the independent contractor model, that the emissions requirements were never formally challenged by anyone.

Many will recall that ATA did sue POLA on the IOO ban, which went all the way to the SCOTUS. The high court eventually found that the employee mandate/independent contractor ban was in violation of federal law, specifically the Federal Aviation Administration Authorization Act (F4A) provision that gives the federal government exclusive jurisdiction over rules that impact the routes, rates, or services [missing word] motor carriers.

Despite lower court rulings in favor of the employee mandate, the clear violation of F4A gave ATA confidence to pursue the litigation against the POLA all the way to the high court. Long Beach was not sued because they decided to remove the employee mandate all together and avoid litigation to save precious capital resources. However, Long Beach did move forward on the truck turnover portion and other provisions under a registration agreement that ATA and POLB agreed on in lieu of the IOO ban.

However, ATA was not willing to challenge the emissions standards at either port, so the standards went forward while the IOO ban was being challenged. This left many motor carriers with the issue of having several owner operators – thousands in fact – who were unable to secure new equipment.

Some forward thinking IOOs and their motor carriers capitalized on grant opportunities and low interest guaranteed loans through the Port Finance Acceptance Company (PFAC), a creation of Daimler Truck Finance and a southern California finance firm, Crossroads Equipment Lease and Finance.

With the grants and a PFAC loan, some IOOs were able to secure trucks with monthly payments as low as $250 using only the grant money as a down payment. Between state and local grant funds, over 1,600 trucks were replaced in LA/LB. However, at the time of CAAP’s passage in 2006, there was estimated to be 12,000-16,000 trucks servicing LA/LB port complexes. Needless to say, there was a large unmet need for financial assistance.

In order to offset these high costs, trucking companies set up programs to lease newer, clean trucks directly to their IOOs to continue in port service. Many of these leasebacks came with strings attached that among other things prevented their IOOs from taking their “tool” (in this case the truck) to another carrier.

Granted, thousands of drivers in this leaseback scenario were able to pay off their truck and still make a good wage. Many in fact have upgraded their equipment through traditional finance institutions once they were out of their leaseback, having received a positive credit bump from their completed lease that carriers reported to credit bureaus.

Although well intentioned, the problem with the leaseback arrangement is that when the employment test is applied by federal or state regulators, more often than not it is found to be one of many influential factors for misclassification. One of the key provisions in determining whether or not an independent contractor is misclassified is who is in control of the “tools.”

The central question is: How can someone be truly an independent contractor when the tools they are using to complete the task are not only provided by, but are in fact owned by the company who is contracting with the driver?

Recent court decisions and decisions made to stave off potential misclassification actions outside of litigation have only served to complicate the issue. Regardless of many independents wanting to remain as such, large intermodal carriers such as Comtrak Logistics, have completely abandoned the IOO model in favor of employee drivers, leaving the independent entrepreneurs to find work hauling for another motor carrier or stop driving in port service all together.