Monday, March 23, 2015

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

Friday, March 20, 2015

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.


Tuesday, March 10, 2015

National Ports Initiative

EPA Subcommittee Seeks to Identify and Control Sources of Port Pollution 
Across the United States more than 150 deep channel sea ports serve our nation. These economic engines of commerce support hundreds of thousands of jobs and act as the conduit for the import and export of essential (and some not so essential) goods.
Across the West Coast, the major container ports are slowly beginning to dig out from the backlog created during the ILWU and PMA negotiations. Unfortunately, it will be months before the terminals will be back to “normal” operations. But, for anyone in the port trucking community, “normal” leaves much to be desired.
The labor slowdown merely highlighted issues that dray men and women have endured for years; congestion, equipment shortages, extended turn times all of which limit productivity and essentially cost everyone. With the ports in the national spotlight as of late, it would only seem fitting that the EPA would want to highlight the work it is doing via subcommittee to tackle emissions at ports across the country. The overall effort is referred to as the National Port Initiative which will seek to define emission and sources at ports across the country.

Primarily the group is relying on the Mobile Source Technical Review Subcommittee Port Work Group to come up with strategies for regulatory development and enforcement, community engagement and identification of barriers to technology deployment and how to remove those barriers.

The subcommittee does mention voluntary actions for ports, but a voluntary program on the federal level can become a local mandate with the stroke of a pen. The first step is establishing emissions inventories or at least best practices; tactics will be recommended for reductions, and those ports with the most need for emissions reductions will need to embark on a program to reduce.

Granted, there are many different strategies that can be deployed for emissions reductions within port complexes. It will be expected however, that operational issues won’t be addressed and instead technology forcing or behavior modification will be the driving force for emissions reductions across the country.  

Wednesday, March 4, 2015

Truck Rules All Around?
Tightening Ozone Standard May Squeeze On-Road Trucking Fleet in US

Lost within the debate over energy policy and climate change is the tightening ozone standard and how it may impact the on-road trucking fleet in many states across the county. The plan is under scrutiny from Congress, but not because it will impact truck fleets, but because refineries and power providers will more than likely face increased costs and possible layoffs.
A newly formed subcommittee called the Interior Subcommittee of the Oversight and Government Reform Committee has been tasked in part to keep a close eye on the Environmental Protection Agency. One thing they will be looking at besides keeping a watch on EPA management and the national park maintenance backlog will be the tightening Ozone standard.

This is not the first time at the dance for the lower ozone standard. The Bush Administration originally delayed initial implementation of the 70-65 ppb recommendations in 2008 when a 75 ppb standard was adopted. When Obama got into office, EPA administrator Lisa Jackson said the standards weren’t legally defensible.   The EPA forged ahead on tightening the lower standard but was sidetracked in September 2011 when the plan was delayed right before the 2012 election.

So in 2013, environmental groups sued. In April 2014, the 9th circuit court said the standard must go forward and a final rule in must be in place by October, 2015.  California has the most to lose when it comes to the lowering standard because many of the regions across the state would be out of attainment. Being as such, the Golden State has until 2037 to meet the standard, while the rest of the county would have until 2025.
The debate on this issue will quite possibly be more political than regulatory.  The standard seems to be moving forward unless a legal challenge is sought from the opposing side. Congress may however be able to put pressure on states to look for other sources for reductions besides some of the more well-heeled refineries and power producers.

For the transportation industry, the Ozone standard may in fact prove to spur additional incentive opportunities for turnover to alternative fuel platforms it may also spur state governments to look at tightening in use turnover standards on heavy duty trucks. See “Diesel Starts with Die” CLICK HERE.
States including but not limited to, Arizona and New York, New Jersey, Connecticut, Rhode Island and Delaware may need to take a serious look in how they are going to meet the standards.

This may include accelerated turnover of heavy duty trucks to help to meet the Ozone standard EPA is proposing. According to the EPA, older diesel engines and other mobile sources are significant contributors to NOx pollution. NOx is a pre cursor to Ozone, so in theory, reducing NOX emissions will also reduce Ozone.
Although Ozone can occur naturally it is difficult for sates to predict or even control natural phenomenon like thunder and lightning storms which can bring stratospheric ozone closer to Earth’s surface. They can however control through state regulation or legislation the configuration of in-use, heavy duty diesel engines that operate within state or local boundaries. If the problem is bad enough, states basically have the blessing of the federal government because of the Clean Air Act. This makes legal challenges difficult to say the least.  Typically the first step is requiring public agencies to adopt cleaner technology. Once that happens, private industry is next.

It is very possible that natural attrition of the truck fleet may not happen fast enough for states to meet the standard. And despite the latest federal engine standards, in-use emissions from the legacy fleet in these states will be in the crosshairs. This will mean state or possibly federal regulations depending on the ability of state regulators to tackle the problem. 2025 isn’t that far away.  Stay tuned!