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Cost of compliance expected to reach $13 billion
The California Office of Administrative Law recently approved the state air board’s controversial off-road diesel retrofit regulations. The rules take effect on June 15, 2008. AGC of America will continue to oppose California’s effort to set new standards for the exhaust from existing fleets of off-road diesel equipment, persisting in its effort to bring reason to the long-running debate over this equipment.
California is the only state that the Clean Air Act permits to set its own engine exhaust standards. The debate over its off-road diesel equipment began in 2005, when the California Air Resources Board (CARB) loudly announced that it planned to impose much more stringent standards on the exhaust from such equipment. CARB completed its work on those standards in April of this year.
The new standards and related rules require California’s construction contractors to retrofit, repower or replace their exiting fleets of off-road diesel equipment at a cost expected to reach $13 billion. In 2009, owners of off-road diesel equipment must start labeling and reporting on their equipment, limiting the equipment’s idling time, and restricting their purchases of older equipment. In the following years, the rules require these companies either to meet annually declining targets for average emissions, or to retrofit, repower or replace a percentage of their equipment fleets’ total horsepower.
California cannot enforce its new standards until the U.S. Environmental Protection Agency (EPA) also reviews and approves of them, and the courts have yet to address whether CARB has met the relevant legal standards, or even possesses the authority – as a matter of state law – to adopt them. If the rule were to clear all of the remaining hurdles, other states with air quality problems would, however, be free to adopt the same rule. Fifteen other states have already adopted one or more of California’s other emission standards, and several have already expressed an interest in the latest one.
During the rulemaking, AGC submitted four separate sets of comments, affidavits and expert reports exceeding a total of 300 pages in length. In the comments, AGC demonstrated that CARB had:
* understated the cost of retrofitting or replacing the existing equipment;
* overstated the options for repowering such equipment with entirely new engines;
* undercounted the amount of existing equipment, and exaggerated its natural turnover rate;
* exaggerated the resale value of the equipment that the rule would render unusable in California;
* wrongly assumed that construction contractors can simply pass all cost increases along to their clients, without regard to the competitive forces at work in the construction marketplace;
* failed to account for the rule’s impact on construction contractors’ net worth, and in turn, their ability to finance the required investments; and
* disregarded downstream effects on employment in the construction industry, and the time and cost of making critical improvements to the state’s infrastructure.
Another great concern is that the major engine manufacturers cannot make a public commitment to providing the technical support that the construction industry needs to comply with the rule. At this point, it remains far from clear that compliance is even possible.
 
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