Relief for out-of-state operators

March 1, 2006
Faced with the prospect that the US Environmental Protection Agency could authorize California's refrigeration unit exhaust emission regulations with

Faced with the prospect that the US Environmental Protection Agency could authorize California's refrigeration unit exhaust emission regulations with a waiver of preemption under the authority of the federal Clean Air Act, the American Trucking Associations fired the most recent shots in trucking industry attempts to stall state implementation of the new rules. ATA is joined in its opposition by the California Trucking Association, the Truckload Carriers Association, and the Truck Renting and Leasing Association.

Following almost two years of staff research and public comment, the California Air Resources Board published regulations governing exhaust emissions from the engines used to power transport refrigeration units and the generator sets used during highway operation of marine containers cooled by electric refrigeration units. The regulation divides refrigeration and gen set engines into two categories based on operating horsepower — below 25 hp and above 25 hp. Beginning in 2008, for the under 25 hp category, refrigeration engine exhaust emissions will be limited to 0.30 grams per horsepower/hour. The limit for engines producing more than 25 hp will be 0.20 grams per horsepower/hour. In addition, the rules mandate extensive record keeping requirements.

The new rules were published in December 2004, and are intended to apply with equal force to units operated by fleets based in California and to units operating in California on a temporary basis such as those belonging to truckload carriers making deliveries in the state or carriers picking up shipments for destinations out of state. California has requested an authorization for a waiver of preemption from EPA under the Clean Air Act.

Aiming for health benefits

Although the new rules are actually exhaust emission regulations, California labels the new rules an Airborne Toxic Control Measure, stating that the purpose of the rules are to reduce the emission of particulate matter from diesel engines. The state has defined the particulates in diesel exhaust as a toxic air contaminant and says that they are the primary contributor to adverse health conditions among known air contaminants. A scientific review panel of the California Environmental Protection Agency, in the past, has approved a staff report that says diesel exhaust has the potential to cause lung cancer in up to 450 out of one million people. The report also suggested that as many as 14,580 premature deaths in California can be attributed to diesel exhaust annually. The stated purpose of the new California rule for refrigeration and gen set engines is to reduce particulate emissions from small diesel engines by 75% by the year 2010 and by 85% by 2020.

Government documents are notorious for jargon and arcane abbreviations. For ease of reading through the remainder of this report, those abbreviations have been rendered in plain English and enclosed in brackets to show where the plain text differs from the exact language of the document.

Explaining the application of the California rule to out-of-state businesses in a document titled “Final Statement of Reasons,” the Air Resources Board said it “does not believe that the recently adopted [rule] will impose a significant burden on out-of-state [refrigeration unit] owners or operators. First, individuals or fleets [of refrigerated trucks or trailers] will have until 2008 to decide whether or not they intend to operate in California and need to comply. Between 2004 and 2008, as a result of routine fleet turnover rather than regulation, most out-of-state longhaul trucking companies are expected to replace existing [refrigeration units] with units that meet both the proposed federal Tier 4 standards and [the California] standards. Second, staff does not believe that entire out-of-state refrigerated fleets, nor more than that portion of any out-of-state fleet that actually travels within California, will need to comply. Modern day truck dispatching uses the latest communication technology including global positioning systems. This technology, coupled with inventory and record keeping should allow trucking companies to know where each [refrigerated] vehicle is at any particular moment in time. With such knowledge, dispatchers could direct fleet vehicles sending only vehicles with compliant [refrigeration] engines to California. Finally, because of California's location, it is very unlikely that many refrigerated trucks will drive through without making a pick-up or delivery within the state.”

State rule with national scope

In its comments opposing California's request for EPA authorization, ATA immediately takes issue with the scope of the proposed regulations, stating that the rule “effectively extends the reach of California's engine emission regulations far beyond the state's borders without meaningful limits, sweeping up much of the national trucking industry in the process.” The association argues that more than 95% of the nation's fleet of 565,000 motor carriers have fewer than 20 trucks and that “their livelihood can be dramatically impacted by new regulatory requirements that are imposed broadly on existing equipment, as in the case of the [transport refrigeration unit] regulation.”

Attempting to refute California's argument that its rule will apply to only that portion of an out-of-state operation that actually travels in the state, ATA says, “most significantly, the regulatory requirements fall primarily upon in-use engines located outside of California.” The comments point out that refrigeration units move throughout the country as part of tractor-trailer combinations in exactly the same manner as the rest of the nation's long-haul trucks. Modern truckload carriage is a chain of individual trips involving a series of discrete, one-way contracts of carriage that continue commonly for periods of up to two to four weeks. The company and driver do not usually know the sequence of chain segments at the time the trip chain begins, ATA argues. As a result, “equipment must be legally eligible to operate anywhere in the company's service area for a motor carrier to compete in the marketplace,” the association says.

Carriers cannot confine economically the operation of their refrigeration units to California, because they need fleets capable of participating in the free flow of commerce throughout the country, ATA argues. As a result, the California refrigeration unit exhaust emission rules will have the effect of creating a national standard for small engine emissions where none has existed before imposing economic burdens and the consequences of enforcement activities on operators “who had no reason to suspect they were being swept up wholesale into a California regulatory regime.”

Application too broad

The California Air Resources Board could have attempted to limit application of its rules to engines used primarily within the state, but did not do so, ATA says. Rather than make a meaningful effort to limit impact of the rules to engines used mostly in California, the Air Resources Board seeks to require the retrofit or replacement of any out-of-state equipment used to transport temperature controlled freight on the national highway system if, for any reason, that equipment were to be operated in California however limited that operation might prove to be, ATA argues.

The new rules are not local in nature, because, in its rulemaking, California authorities estimated that 30,300 refrigerated trailers operate in the state every day. The estimate assumes that 22,800 of those are based in California and that 7,500 trailers enter from out-of-state, ATA says. Those out-of-state trailers are assumed to be the same every day. ATA argues that the actual number of trailers subject to the proposed California rules will be nearly 30 times greater than the Air Resources Board suggests with the result that about 340,000 refrigeration units would need to be retrofitted or scrapped and replaced during the early years of enforcement at a cost between $775 million and $1.4 billion. In contrast, the California Air Resources Board based its rule on the assumption that total cost of compliance would range from $87 to $156 million. However, in one of its own documents supporting the proposed regulation, the Air Resources Board said, “No direct data are available on the number of [refrigeration units] from out-of-state operating in California at any given time.”

Residual value of existing refrigeration units looms as another factor in the cost of meeting the California emission rules, ATA says. If imposed by the state and EPA, the regulation would greatly reduce or possibly eliminate completely the resale value of existing units, because they could no longer be operated in California, particularly by individual produce haulers, who are a prime market for used refrigerated trailers.

Unrealistic cost justification

Justifying its proposed cost of compliance, California says that implementation of the new rules would remove particulates from the atmosphere at a price of $10 to $20 per pound. ATA estimates that the price for out-of-state refrigeration units alone would require expenditures of $330 to $660 to remove a single pound of particulates from the air.

In addition to its objections to excessive costs and flawed assumptions as to the number of units affected, ATA says the rule is aimed at the wrong targets. California, ATA says, seeks to impose its new rule on users rather than the manufacturers who potentially have access to the technology needed to meet the regulation's requirements. The Clean Air Act allows rules that force the adoption of new technology, but that possibility is based on the premise that such requirements would have to be met by manufacturers. However, the California regulations have no regulatory consequence for manufacturers and force them to do absolutely nothing, ATA says. Instead, the rules focus on users, most of whom lack the expertise or resources to develop their own technical solution for meeting the requirements.

This is particularly troubling, ATA says, because even the California Air Resources Board recognizes that about 80% of the fleets affected by its rules are small independent operators with no engineering capability and no credible leverage over the manufacturers that supply them with refrigeration units. Instead, ATA says, the rule “gives manufacturers every incentive to ignore the [refrigeration unit] retrofit market for the very reason that their failure to develop retrofit technology not only carries no penalty for them, but also places users in the position of having to purchase new engines.”

Hard on lessors

The portion of the new rule that provides for penalties on the owners of noncompliant refrigeration units falls especially heavily on leasing companies, TRALA argues. The association says that its members do not always know where fleet operators will use their equipment. As a result, leasing companies would be forced to convert significant parts of their fleets to California-compliant equipment to guard against leasing refrigeration units that could expose them to fines.

As an alternative to running certified engines, refrigeration unit or gen set operators can choose to retrofit equipment with equipment that meets the standard for verified diesel emission control strategies. To meet the low emission standard with retrofit equipment, the control strategy must reduce particulate emission by 50% or more. To meet the ultra low emission standard with retrofit equipment, emission reduction must be 85% or more or produce no more particulates than 0.02 gram per horsepower-hour.

California has conceded that its refrigeration engine exhaust emission rule does not rely on information that retrofits of existing equipment are technically feasible or that retrofits will become available to users if the technology can be developed. The Air Resources Board seems to think that users can comply with the rule by scrapping existing refrigeration units and buying new ones or by replacing the engines in current units, ATA says.

Limits unit life

California says its new rule is reasonable, because normal fleet turnover will allow most users to comply with the progressive nature of the exhaust emission reductions without extraordinary measures. However, ATA argues that the new rule effectively reduces the service life of refrigeration units to seven years, notwithstanding a concession by the Air Resources Board that the average service life of refrigeration units is 10 years with some remaining in use for more than 20 years.

During the original comment period prior to the state publication of the rule, the California Trucking Association complained that the regulation “is more far-reaching than any measure yet made by an air quality agency of the United States or Europe.”

The Air Resources Board dismissed the comment, saying, “The ARB does not necessarily concur that the [rule] is the most far-reaching measure ever adopted by an air quality agency, but will acknowledge that Congress has recognized the ARB as the nation's pioneering effort in emission control and that it serves as the nation's laboratory for innovation. In allowing California to be the only state in the nation to be able to obtain waivers from the motor vehicle preemption [citation of specific paragraphs of statutes], Congress fully intended that the ARB adopt potentially more stringent emission standards and related requirements to address the unique and serious environmental problems confronting the state. Indeed, in order for California to obtain a waiver or authorization from preemption, the ARB must demonstrate that the adopted emission standards are more protective of public health and welfare than applicable federal standards and requirements. In other words, California must demonstrate that its standards are, indeed, in the aggregate, at least as stringent as federal regulations.”

Apparently California authorities do not believe the state needs authorization to issue such regulation. The Air Resources Board says it has requested EPA authorization simply as a legal precaution. ATA argues that EPA should send the rule back to California with instructions to draft a new regulation that limits the reach of the standards to engines based outside the state in a more reasonable manner.

The Air Resources Board is clear about its intent. In the Final Statement of Reasons from the original 2004 publication, it says, “The [rule] is intentionally designed to accelerate the turnover of older, higher emitting [refrigeration units] with newer [refrigeration units] with cleaner engines, or to replace older, higher emitting [refrigeration] engines with newer cleaner engines.”

At the same time, documents contained in the original rulemaking process make it clear that the Air Resources Board sees reliable refrigeration unit technology as essential to ensure the safe transportation of food and other temperature-sensitive products throughout the US.

About the Author

Gary Macklin

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