Real Estate and Construction Law Blog

By Randolph C. Visser and Olivier F. Theard

Recognizing that many industrial businesses in California operate using older, and thus more polluting, off-road diesel vehicle fleets, the California Air Resources Board (CARB) has proposed new regulations intended to reduce emissions of particulate matter (PM) and nitrous oxide (NOx) from such vehicles and require businesses to retrofit or "turn over" their fleets over time.

In brief the proposed regulations:

• Apply to any diesel-powered off-road engine with 25 or greater horsepower.
• Establish emission reduction standards by year, with declining emissions over time, that vary whether the diesel fleet is considered large, medium or small, as measured by the fleet's total horsepower (for most private businesses under the current iteration of the rule, a "small fleet" is total HP below 1,500, a medium fleet between 1,501 and 5,000, with anything over 5,000 considered a "large fleet").
• Under the current version of the rule, large fleets must meet both NOx and PM emissions reductions starting in 2010 (with reporting starting in 2009).  Medium fleets by 2013 (reporting in 2009).  Small fleets are exempt from NOx emission rules, but must meet PM standards by 2015 (reporting 2009).
• The proposed rule requires the use of retrofit technology, and the "turn over" of vehicles to cleaner engines over time, with reference to a percentage formula.
• The rule allows for certain case-by-case exemptions, such as for very new vehicles and specialty vehicles under various conditions.  Other types of vehicles, such as stationary equipment, generators, locomotives and marine vehicles, are categorically exempt from the regulations, as are "low use" vehicles (less than 100 hours of operation yearly).

CARB estimates the total cumulative cost of the regulations to be between $3.0 - $3.4 billion, with the majority of the costs occurring between 2010 and 2021.

The regulations are still under consideration, and CARB is scheduled to make its final decision on these regulations on July 26, 2007. Until then, the proposed regulations remain open for public comment.  To comment or obtain more information, please visit www.arb.ca.gov, or call 1-866-6DIESEL.  Once CARB issues the new regulations, Sheppard Mullin will provide an update to this article and will summarize the relevant modifications.

Impetus for Proposed Regulations

The primary justifications for the new rules are (1) the negative health effects of PM and NOx, and (2) the need to meet federal clean air standards in order to avoid sanctions.  Regarding health, CARB estimates the new regulations will prevent 4,000 premature deaths and save $18-26 billion in health care costs.  Regarding emissions, CARB expects the new regulations will reduce 33,000 tons of PM (a 92% reduction from 2000 emissions) and 187,000 tons of NOx (a 32% reduction from 2000 emissions) between 2009 and 2030.

Scope of the Regulations

The proposed regulations apply to any person, business or government agency that owns or operates any diesel-powered off-road vehicle in California with 25 or greater horsepower.

The regulation applies to any self-propelled diesel vehicle that cannot be licensed to drive on- road.  The types of vehicles subject to regulation include:  vehicles used in construction (i.e. backhoes, tractors), mining, rental, landscaping, recycling, landfilling, manufacturing, warehousing (i.e. forklifts), airport ground support, skiing (i.e. snowmobiles), composting, and other vehicles in various industrial operations.

Categorically exempted from regulation are (1) personal use vehicles, and (2) stationary equipment or portable equipment such as generators.  Also exempted are locomotives, marine vessels and marine engines, recreational vehicles, combat or tactical support vehicles, agricultural vehicles, and equipment at ports and railyards.

Overview of Requirements

The emission requirements are intended to require fleets to apply exhaust retrofits that capture pollutants before they are emitted, and to accelerate turn over of fleets to newer, less-polluting engines.

Owners are subject to different requirements depending on the size of their vehicle fleet, measured by horsepower.  In general, total fleet horsepower of less than 1,500 is considered a "small fleet."  Total fleet horsepower between 1,501 and 5,000 is considered a "medium fleet," and total fleet horsepower over 5,000 is a "large fleet."  State and federally owned fleets are considered "large fleets" without regard to total horsepower.

Small, medium and large fleets all must meet the yearly fleet average emission rate targets for PM or apply the highest level verified diesel emission control system to 20% of its horsepower.  Large and medium fleets (but not small fleets) must also be required to meet the yearly fleet average emission rate targets for NOx or to turn over a percentage of their horsepower (8% in early years, 10% in later years).

"Turn over" means retrofitting an engine to capture pollutants, replacing a dirty engine with a clean engine, retiring a dirty vehicle, replacing a vehicle with a new or used piece, or re-designating a vehicle as "low-use."  "Low-use" vehicles (which operate for less than 100 hours per year) are exempt from emission requirements, but still must be properly labeled and reported to CARB.

Large and Medium Fleets

Large fleets must start meeting certain targets by 2010 and must begin reporting on April 1, 2009.  Medium fleets must start meeting certain targets by 2013 and reporting by June 1, 2009.  Annual reporting of fleet changes is also required.  CARB estimates a yearly compliance cost of 0-$180 per horsepower.

Below are the most recent emission targets by fleet and year.  These are expected to change before adoption of the final rule in July 2007:

Table 1 – Large and Medium Fleet NOx Targets
For Use in Calculating Fleet Target Rates [g/bhp-hr]

Table 2 – Large and Medium Fleet PM Targets
For Use in Calculating Fleet Target Rates [g/bhp-hr]