1 CARB Fuel Spec June 21, 2000 Michael Eaves NGV Program Manager Southern California Gas Company

2 Background 1992 CARB Commercial Fuel Spec Pipeline Composition vs. CARB spec –North coast (north of Santa Barbara) –SJV (Elk Hills supply) –Local producers within LA basin Fuel “blending” operation –Utility, fuel provider, or customer owned stations in impacted areas –Truck delivery of “blend gas” to stations –Control of blend ratio

3 Issues CARB compliance (legal, financial, liability) Utility “obligation to serve” –Tariff language –Blending not viable solution Utility deregulation –Provide/expand blending service –Roles/responsibilities (utility, fuel provider, customer) Market development –Third party fuel providers –Environmentally driven –FuelMakers

4 NGV Tariff Language "Due to California Air Resources Board (ARB) fuel specification regulations, the Utility may not be able to provide natural gas for motor vehicle refueling in some areas of its service territory without some additional location-specific equipment requirements. Therefore customers intending to provide or use natural gas as a motor vehicle fuel must inform the Utility of such intentions prior to such provision or use. The Utility and the customer will determine what location-specific equipment requirements if any are needed to satisfy ARB fuel regulations for the provision of NGV service."

5 Fuel Blending Marginal solution –Reduces station capacity & effectiveness –Works at underutilized & small stations –Not a solution for high volume stations Blending not cost effective –Capital, labor, and service Utility ability to provide service –Blending capability maximized –Can’t provide blending to new stations Solve problem at source

6 Producer & Supplier Contracts Utility increasing local gas purchases Long-term contracts Control composition into pipelines –High cost capital fixes –Years to negotiate and execute agreements/fixes Renegotiate long-term contracts –Identify cost for producers to comply with CARB Spec –Identify options –Identify timing to comply –Execute agreements

7 NGV Market Development Drivers Marketing by Fuel Providers Regional air quality problems (SJV) Diesel toxicity and health concerns Local public policy initiatives Expanded product availability and promotion by OEMs Fuel cost savings potential (high oil prices)

8 FuelMakers Marketed and sold by franchise distributorships Expanded product line –Individual “home” refueling appliance –Small commercial systems –Add-on fuel storage Installed as individual units or multi units in small system Possible for customer to purchase and install without utility awareness (on “house-line”) Can fuel light duty vehicles or vehicles like school buses Utility usually finds out after-the-fact Utility obligation once a problem is known

9 Need for Revised CARB Spec Current exemption for limited number of private stations –No fueling of public vehicles permitted NGV market development requires –Economies of scale of larger compressor systems –Expanding infrastructure/availability –Maximizing station utilization by allowing public access Expanding exemption to private stations only only a partial solution Need combination of –Revised fuel specification –Revised supplier contracts –Hardware fixes at suppliers

10 Worldwide NGV Technology Needs Engine/vehicle manufacturers looking at worldwide NGV markets (China, Mexico, Africa, Latin America, SE Asia) Gas composition variability greater in other parts of world OEMs developing more robust technology for world markets

11 Recommendation

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