Construction contractors in California are battling a statewide air quality board that wants to enact what is considered the nation’s most stringent off-road diesel engine regulations. Millions of dollars in construction machinery might have to be retired prematurely and at huge cost to contractors if the California Air Resources Board rules the equipment out of order.
What’s more, the issue is not confined to California. The standards being negotiated on the West Coast will influence environmental policymaking in heavily populated states back east, with similar impact on local contractors.
The good news is that both sides are beginning to believe a compromise still is possible — one that can clean the air without bankrupting the industry.
Essentially, the California board wants to clamp down on the emission of particulate matter and nitrogen oxides. It is reacting to medical data that show an estimated 70 percent of toxic air risk comes from particulate matter emitted by diesel engines. The medical surveys indicate that 2,000 to 2,500 premature deaths and 3,600 hospital admissions per year can be attributed to the pollutant.
Consequently, the board and its staff want to reduce sharply the offending emissions of off-the-road diesel equipment, an objective that targets construction companies. The board’s goal is a 75 percent reduction in particulate matter and nitrogen oxides by 2010 and an 85 percent reduction by 2020.
“The question is, how do you do that?” asked Mike Lewis, who is in the center of the debate. Lewis is senior vice president of the Construction Industry Air Quality Coalition, an organization formed 15 years ago when the industry was confronting regulations to control dust on construction projects. “I’m not sure anyone thinks you can get to 85 percent by 2020.”
Lewis estimated that southern California has 200,000 pieces of off-road equipment, most of it diesel-powered and all of it built to last a long time. The durability of the heavy equipment means that contractors do not plan a wholesale replacement of the equipment any time soon. Therefore, the engines must be brought into compliance with new emissions standards or the equipment will have to be parked.
The Five Rs
The Air Resources Board’s plan to create such relatively swift change incorporates what can be termed the 5 Rs:
• Retrofit older engines with new technology that controls emissions;
• Repower the equipment with new, cleaner engines;
• Replace the equipment with new machines with cleaner engines;
• Rent new equipment with cleaner engines; and
• Reduce idling of all engines.
Contractors have problems with each of the options.
“I can tell you,” said John Hakel, vice president of government relations at Associated General Contractors of California, “that there still are some hurdles that are fairly large for the construction industry in the state of California. The state Air Resources Board really has to come down to the reality of how fast we can either retrofit construction equipment or buy new construction equipment.
“Both of these have tremendous deep pocket problems for everyone, from the giant contractors to the moms and pops. In talking with Caterpillar and others, they can’t even make the engines quick enough for contractors to buy them, even if the contractors could afford to buy them.”
A seven-year-old grant initiative of the Air Resources Board is the Carl Moyer Program, which targets old, polluting engines. Specifically, the program is designed to accelerate the development and commercialization of advanced emission control technology, accelerate the turnover rate of old equipment to newer and cleaner equipment, and help reduce costs to the regulated community.
In its first six years, the Carl Moyer Program provided $154 million in funding to clean up approximately 7,000 engines statewide, according to the board’s Web site. The program managers claim it has reduced approximately 18 tons per day of nitrogen oxides and 1 ton per day of diesel particulate matter.
But Carl Moyer funding isn’t going to get the job done, said Hakel. “As soon as the money gets into the system, it is sucked up. We are millions and millions of dollars short there. That money is out and earmarked in a heartbeat.”
In an interview in October in EGCA Advocate, an Engineering & General Contractors Association publication, two California construction industry proponents of cleaner engines were interviewed about their voluntary efforts to reduce emissions in their fleets of equipment. One was Mike Ortiz, president of Sukut Equipment Inc., a subsidiary of Sukut, one of the 300 largest contractors in the country, and the other was Mike Shaw, president and co-owner of Perry & Shaw, a California earthmoving contractor. Each has presided over repowering of equipment in their fleets for environmental reasons.
“Under the Carl Moyer formula, we could meet the 2010 targets,” Ortiz said in the interview. “But using CARB [California Air Resource Board] staff’s new hard, theoretical formula, we can’t … Despite the millions we spent repowering 130 engines, we won’t be able to meet the targets, all because of a choice of formulas.”
Shaw said the board’s staff members “are educated in science, but not the industry. Why would they pop up with a new formula at the 11th hour — heck, the 11th-and-a-half hour? … It makes you wonder if maybe there is some predetermined outcome and they’re just going through the motions to get there. Some of the very foundations on which they’ve based their proposed regulations have clearly been shown to be faulty.”
Theoretical vs. Practical
The divide is wide between practical operation of diesel engines and what is viewed as theoretical operation. This is so despite efforts by the industry to educate the regulators and efforts by Air Resource Board staff members to reach out to the industry for advice.
“Generally, most industry stakeholders have been helpful and constructive,” said Karen Caesar, an information officer for the Air Resources Board, adding that the staff has tried to incorporate the feedback. “We have made a number of changes to the proposed rule in response to industry suggestions.”
A case in point concerns idling engines. The board first proposed that engines not be allowed to idle longer than five minutes, thereby cutting down on emissions from power units doing nothing more than sitting in place and running. The staff soon learned that idling is not a small issue to the industry, which strenuously objected to the proposal.
“The staff tried to set a time limit on idling,” the air quality coalition’s Lewis said. “Once we explained to them how the start up and shut down of engines works, how a mechanic starts and checks them all an hour before the machines are driven away, I think they understood that when you have 30 scrapers lined up and a mechanic fires them up, that will take time.
“In the last iteration of the policy, what they suggested is that they wanted each company to have an idling policy, to place some emphasis on reducing idling as much as possible.”
While that might be true, Caesar doesn’t seem as flexible. “The rule as currently proposed would include a 5-minute limit on unnecessary idling. There are exemptions for idling necessary for safe operation of the vehicle or for vehicles that need to idle to do the work for which they were designed.”
While industry leaders seem generally unimpressed with the credibility of its information, a survey by the Air Resource Board concluded that 69 percent of heavy equipment contractors in the state have 10 or fewer pieces of equipment in their fleets. Part of the problem industry leaders have is a lack of communication among many of these small contractors.
Hakel at the AGC said his organization is involved in a “missionary” effort to get out the word about the proposed regulations. The effort is made more difficult because his organization has approximately 1,500 members, while he estimates California has 300,000 contractors.
“I would say the contractor community that is tied into a trade group is painfully aware of the proposed regulations, but that is not a large percentage of the industry,” he said. “A very large community of folks doing this kind of work has no idea this is coming down the pike.”
Clean-Air Engine Revolution
This particular environmental regulatory struggle is part of the larger clean-engine revolution that has been going on over the last decade. Manufacturers and after-market technology leaders are under the gun to produce systematically cleaner engines demanded by public authorities.
Not all generations of diesel engines produced by different manufacturers — such as Caterpillar, Cummins and John Deere — are comparable. Some engine brands going into production are more advanced than others that are produced on the same manufacturing cycle. Consequently, it is difficult to say an engine produced after a certain date meets a particular emissions level.
All of the engines, however, fall into one of four categories: Tier 0 (the oldest and presumably dirtiest), Tier I, Tier II and Tier III. Tier I emission standards were phased in in years 1996 to 2000 for engines more than 50 hp. Tier I standards for smaller engines and Tier II and III standards for all engines are being phased in between 2000 and 2008. Tier IV engine standards are to take effect over the period 2008 to 2015.
In connection with these developments, the Environmental Protection Agency also has mandated steep reductions in sulfur content in diesel fuels so filters and absorbers in the new equipment won’t be fouled and rendered ineffective.
“We are assuming that half of the engines in the state are Tier 0, a very, very small percentage being Tier II and the balance being Tier I,” Lewis said. It follows that all of the existing stock of equipment will have to be repowered, refitted with emission controls or retired.
One part of any solution is fleet-averaging. As proposed by the industry, companies would average the pollutant emissions produced by their equipment, with the fleet average having to meet an acceptable level and steadily decrease thereafter according to a schedule. The Air Resources Board has agreed to include some fleet-averaging statistics in its regulations, which gives contractors hope of upgrading equipment a piece at a time rather than all of the equipment at once.
“The problem now is the number the contractors have to meet,” Lewis said. “Using their formulas to determine what the fleet emissions were in 2000 and what they will have to be to meet the new standards, none of the contractors can meet the standard.”
Construction industry leaders also are skeptical that retrofit devices or new engines will come on the market as quickly as regulators expect, which could leave contractors holding the bag. But Air Resources Board staff members are hoping that keeping the pressure on manufacturers and contractors will resolve that problem.
“There is a ’chicken-and-egg’ issue with the development of retrofit technologies for off-road engines,” Caesar said. “Without our rules in place, the retrofit manufacturers have little incentive to market and verify control devices. However, without verified control devices, affected fleets are concerned that the rules will not be feasible.
“The Air Resources Board is optimistic that off-road retrofits will be verified and reach market in time to be a compliance option for fleets affected by the rule. To be safe, however, we are building in ’off-ramp’ provisions that can be used by fleets that happen to start out dirtier than average or that have equipment for which retrofit technologies do not materialize.”
Added Caesar, “These ’off-ramp’ provisions as currently proposed would never require a fleet to turn over more than 10 percent of their equipment in any one year.”
Bottom Line: Survival
The bottom line in all this is survival. Construction companies want clean air, but they also want to be able to keep building. Company executives envision being forced out of business by regulators who bar use of their equipment fleets for environmental reasons. With fleets of equipment deemed unusable, companies not only couldn’t win and execute construction contracts, the noncertified equipment would disappear from the books as a capital asset, leaving them bankrupt.
“There are lots of ways to skin this cat,” Lewis said, “but we don’t want each engine to have to meet the new standard of the state; we don’t want a rule that renders these pieces of equipment of no value.”
Ortiz, speaking in the EGCA Advocate interview, predicted, “people are going to go out of business. The way it is right now, some contractors have elected to do nothing, and I don’t know how they will get their fleets in compliance by 2010.”
Added Shaw in the same interview: “You can have all the theoretical discussions and hard facts and clear arguments you want, but the reality is that what you do physically to each machine is the bottom line. I’m getting down to what is very pragmatic, very physical. At the end of the day, they’re heading toward throwing away 70 percent to 80 percent or more of the heavy machinery in use today.”
Caesar said the Air Resource Board staff is aware of the cost and economic impact of the proposed rule. “We are looking for a balance that achieves the needed public health protection without having too severe a financial impact on California businesses.”
She added that the staff has “had a difficult time obtaining actual data to support a claim that the proposed rule is too costly for industry to afford. We would welcome more details and data on the profits and finances of affected fleets and what level of investment in cleaner engines and retrofits they could afford without being too severely impacted.”
So the exchange of opinion and data continues. Lewis for one believes that, from it all, progress is being made toward a workable solution.
“The Air Resources Board staff is genuinely trying to understand how the industry works and really wants to come to something that contractors can meet,” Lewis said. “They aren’t interested in putting anyone out of business. Yet everything they produce is driven by these numbers — having a 75 percent reduction by 2010. The curve on the graph is so steep that companies can’t do it.”
Lewis attributes the hardcore numbers to a public board that is more idealistic than its staff. The result is that staff members are “hamstrung” in their negotiations with the industry.
“We still have a long way to go, but I do think the staff has made a genuine effort,” he said. “They are not trying to be unreasonable, but they are under pressure to push the envelope as far as they can.”
Besides fleet-averaging, the other hope of California contractors is that deadlines are refigured. Lewis said industry negotiators have asked that the deadlines be moved back to 2015 and 2025, respectively. “We think that enough Tier IV equipment will come on line by then as well as enough verified emissions control devices.”
Hakel also hopes for an easing of deadlines, noting “we are not talking about dozens of years apart.”
The AGC vice president said he is “cautiously optimistic, but ’cautiously’ should be in big print. People are really going to have to roll up some sleeves and see what we can do.”
The industry does have one ace up its sleeve: California voters in November approved a record $40.1 billion in public works spending. Said Hakel: “That creates another set of pressures in the situation.”
Lewis cited the bond approval and raised the prospect of the state not having enough contractors to do all that work. “I don’t know about the rest of the country, but whenever we have a recession, we build our way out of it. We face huge construction activity over the next few years — freeways, levee repairs, water quality projects, dams, transportation, the full gamut of public investment. There are a lot of companies that they could make disappear with their regulations, and that would drive up the price of contracts.”
An Air Resources Board vote on proposed new rules is tentatively set for sometime in the spring. Another round of public workshops, including a series in December, will precede the vote, Caesar said. CEG