1 Proposed Amendments to the Verification Procedure for In-Use Diesel Emission Control Strategies August 23, 2012 California Environmental Protection Agency Air Resources Board

2 Presentation Overview Presentation Overview Background Proposed amendments Impacts & recommendation

3 Diesel Retrofit Verification Program Diesel Retrofit Verification Program Verification Procedure adopted May 2002 Used to verify retrofits for in-use diesel engines Verification ensures Level of emissions reductions Durability and performance Warranty protections

4 Verification Process Overview Applicant develops “market-ready” product Applicant submits application ARB approves test plan Applicant conducts testing ARB reviews results Executive Order issued if all requirements met In-use compliance testing

5 Numerous Retrofits Currently Verified Numerous Retrofits Currently Verified 60+ verified systems for diverse applications* On-road: 25 systems Off-road: 24 systems Stationary: 12 systems Marine: 1 system *as of August 2, 2012

6 Retrofit Market Continues to Grow To date, about 50,000 retrofit sales 2012 to 2016, over 60,000 additional sales (on-road) Efforts to build awareness of compliance dates Diesel Call Center Compliance assistance Gear Up for Clean Truck Month

7 ARB Thoroughly Evaluates All Retrofit Issues Appointed new Retrofit Advocate Field staff evaluates issues as reported ARB has acquired additional equipment to evaluate engines and retrofit systems

8 Keys to Retrofit Success Proper engine screening prior to device installation Good installation practices Proper end-user training Responding to warning lights appropriately Filter maintenance (i.e., proper ash cleaning) Engine maintenance

9 Proposed Amendments

10 Overview of the Proposed Amendments Streamline in-use compliance requirements and reduce costs Add new recall provisions Improve end-user warranty protections Enhanced pre-installation compatibility assessment requirements Installer requirements and end-user training Better define application and review process

11 In-Use Compliance Changes will Reduce Program Costs Reduces amount of laboratory testing and increases sales thresholds Provides alternative test schedule increasing program flexibility Retains stringency of verification program

12 Changes that Protect End-Users Recall Provisions Provides the Executive Officer with new recall authority Better protect consumers of verified devices Addresses issues of safety or catastrophic failure Supports staff’s proposed changes to the In-Use Compliance requirements

13 Changes that Protect End-Users Recall Provisions - continued - Potential recall action based on: In-use compliance failure Excessive warranty claim rates Operational feature failure Safety issues or catastrophic failure

14 Changes that Clarify Warranty Warranty Requirements Clarifies existing manufacturer’s warranty requirements Clearly defines level of coverage and supplemental warranty report trigger Installer warranty requirements Clearly defines level of coverage Requires submission of annual installation warranty report

15 Changes that Ensure System Works Correctly with Vehicle Pre-Installation Compatibility Assessment Clarify and further define engine assessment prior to retrofit Requires verified device manufacturers to authorize their installers Specifies minimum training requirements for device end-users

16 Additional Changes that Improve Program Effectiveness Improve application and review process Improve applicant guidance and information Clarify requirements to provide additional protections to system end-users

17 Public Outreach Public workshops in El Monte May 21, 2011 January 19, 2012 Industry meetings Manufacturers of Emission Controls Association (MECA) Individual companies Proposal incorporates comments received

18 Proposed Modifications 15-Day Changes Clarify staff’s proposal Facilitate warranty repairs

19 Impacts and Recommendation

20 Economic and Environmental Impacts Provides substantial cost reduction to applicants $2.1 to $5.6 million industry wide Potential end-user cost savings and benefits Better assessment of engines prior to retrofit Better installation practices Fewer in-field issues and less downtime Ensures end-users properly trained

21 RecommendationRecommendation Staff recommends approval of the proposed amendments

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24 Retrofit Market Continues to Grow Retrofit Market Continues to Grow

25 Retrofit Market Continues to Grow Retrofit Market Continues to Grow

Current versus Proposed In-Use Compliance RequirementCurrentProposed Phase I/Field Test Sales Trigger50100 Test plan proposal submitted for approvalYes Identify 10 candidate and inspect unitsYes Perform functionality testing in-field so Applicant is not required to take off complete system NoYes Take off minimum of 4 test units for Phase 1YesNo Both Phase 1 & 2 laboratory testingYesNo Submit final report both Phase 1 & 2Yes Alternative Test Schedule pathwayNoYes Phase II/Emission Test Sales Trigger

Economic Impacts In-Use Compliance Cost Savings Amendment Description Scenario 1 (costs) vs savings Scenario 2 (costs) vs savings Replace 1 phase of emissions testing with field testing $4.6 millionNA Alternative Test Schedule (assumes all applicants select this option) NA$5.3 million Allow only one test engine for in-use compliance emissions testing $381,000381,000 Subtotal – Cost savings from the proposed changes to in-use compliance requirements $5 million$5.7 million Recall Provisions($2.8 million)($0) Installation warranty reporting requirements($73,000) Net Savings$2.1 million$5.6 million 27