1. The California Off-Road Diesel Rule
Jim Halloran
CA Reg Affairs Manager

2. Agenda California Off-Road Rule The Off-Road rule Questions
The base rule
The relief measures
Questions
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3. Background Diesel Risk Reduction Plan 8-Hour Ozone
75% reduction by 2010
85% reduction by 2020
8-Hour Ozone
Staff proposes – Board approves
EPA waiver requirement
So what is goal???
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4. In 2011, NOx must be reduced by 50% and PM by 90%
Tier 3 VS Tier 4
In 2011, NOx must be reduced by 50% and PM by 90%
1996
2001
2005
2011
2014
In 2014, NOx must be reduced by a further 80%; PM limits remain unchanged
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5. Off-Road Rule Delay Count on Cat. Everyday.
Please note that the idling, reporting, labeling, and sales disclosure requirements in the regulation remain in effect and fully enforceable. This means that large fleets still must comply with the April 1, 2010, reporting deadline (i.e., still must report their reduced activity and reduced horsepower to ARB).
Also, in recognition of the continuing effects of the global recession, on March 11, 2010, in Sacramento, ARB will conduct a hearing where stakeholders may testify on whether the off-road regulation should be modified further, beyond the relief that the Board already enacted in July, At the hearing, ARB will gather more factual information on the impact of the recession on affected fleets to determine if further changes to the regulation are warranted.
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6. Off-Road Rule Off-highway diesel vehicles 25+ hp that operate in CA
Required to meet decreasing fleet averages or BACT
Timing based on fleet size
Will require DPF’s and engine/machine turnover
Will require recordkeeping, labeling and idling provisions
Fleets can no longer add Tier 0 or Tier 1 machines to fleet
Steep fines for non-compliance
$300 – Idling
$500 – NOx - Up to $10,000 for PM w/a $40,000 max
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7. Off-Road Rule – Fleet Average NOx
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8. Off-Road Rule – Fleet Average NOx
Tier 2
Tier 4
Tier 3
Tier 4 Interim
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9. Off-Road Rule – Fleet Average PM
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10. Off-Road Rule – Fleet Average PM
Tier 1 w/ DPF
Tier 2 w/ DPF
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11. Off-Road Rule – BACT Options
For NOx prior to 2015 requires 8% per year of fleet horsepower to be retired, designated low use or replaced/ repowered with a Tier 2 or better - 10% after 2015
For PM requires 20% of fleet horsepower to be retrofitted per year with highest level VDECS
Tier 4 (with OEM DPF’s) purchases count towards 20%
Exemptions
New vehicles 10 years NOx/5 years PM
Application & Safety
Currently retrofitted or experimental
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12. Off-Road Rule – Compliance Process
Will fleet meet NOx fleet average target?
Yes
Will fleet meet PM
fleet average target?
Yes
Done
For
Year No No
Will 8%/10% of total hp
be turned over by compliance date?
Yes
Will 20% of total hp
have highest level VDECS by compliance date?
Yes No No
Turn over another engine
Apply highest level VDECS to another engine
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13. Emissions Upgrade Group
Compliance Options
Emissions Upgrade Group
Engine
Repowers
Rental
Equipment
Emissions
Solutions
Cleaner
Fuels
Retire
Replace
Aftertreatment
Filter/Catalysts
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14. Off-Road Rule – Misc. Issues
Manufacturer delays – if ordered 4 months before compliance date
Flex Machines
Average Banking and Trading
Safe installation of DPF’s – visibility
Pushed by Operating Engineers and OSHA
Policy and procedures coming
“Under the hood installs” primary path
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15. Legislative Credit Provisions
As of today….
Provides credit for reduced activity from a Jan-Dec ’07 baseline compared to 3/09-3/10 activity levels
Will require records
Can only be used in
Can be combined
Credit for machine retirements and total fleet hp reduction between March 1, 2006, and March 1, 2010
Credits do not expire
No double counting
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16. Legislative Credit Provisions
Allows fleets to spread BACT requirements over time
Special provisions for fleets that meet fleet averages in years
Currently required
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17. Legislative Change Impacts
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18. Credit Provisions – Early Action Items
Exempt early retrofitted vehicles from future turnover
Double credit for early NOx retrofit
Allows medium fleets prior to 2013 and large fleets in 2010 and 2011 to accumulate NOx carryover turnover credit for repowers installed
Provides double credit for small and medium fleets that install highest level VDECS prior to March 1, 2012
More to come????
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19. Guiding Principles
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20. Inventory Options
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21. Off-Road Options
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22. Off-Road Equipment Rule
Over 4 years of workshops
Board approved on July 26, 2007
Office of Administrative Law approved June 15, 2008 – no EPA waiver to date
Legislative changes approved July 23, 2009
Potential for lawsuits – state and federal
Relief measures to be finalized Sept. Board Meeting
It’s basically done and time to plan….
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23. Customer Compliance Issues
You should have fleets registered, labeled and an idling policy in place
You’ve met the April 1 compliance deadline but still have a number of questions unanswered
The credit proposals/additional changes to come will provide more time/opportunity
Incentive money may be opened up but for now it is gone for large and medium fleets
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24. Customer Compliance Issues
Short/long term compliance plans
Financial/credit situation
Cost effective solutions that make long term sense
Need to understand what the relief measures will mean
A partner to guide you along the way
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25. Questions? Comments?? Concerns???
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26. Jim Halloran CA Regulatory Affairs Manager JPH@CAT.COM 916-498-3331
Thank You!
Jim Halloran CA Regulatory Affairs Manager
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27. Governmental Finance Solutions
Lease vs. Buy

28. BUY Pay cash or finance price over a period of time
You are the owner of the equipment
At some point you look to trade-in or sell
Non-Appropriations Clause
Governmental solutions

29. LEASE
Pay for use of equipment over period of time with option to buy at end of term
The leasing/finance company is the owner of the machine
At the end of the lease you look to return and replace equipment or buy it
Non-Appropriations Clause
Governmental solutions

30. ADVANTAGES Lease Buy Cash Flow? Control Maint. Costs? Flexibility?
Total Ownership Cost?
Governmental solutions

31. -Example- Need a Grader?
Sale Price of $186,000
5 year lease vs purchase (60 month term)
hours usage per year
Governmental solutions

32. CASH FLOW
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions

33. CASH FLOW
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions

34. ADVANTAGES Lease Buy Cash Flow? Control Maint. Costs? X Flexibility?
Total Ownership Cost? X
Governmental solutions

35. CONTROL MAINTENANCE COSTS*
CAT Motor Grader (1,500 hrs per yr)
CAT Motor Grader (1,500 hrs per yr)
*Maintenance fee may vary by Dealership
Governmental solutions

36. CONTROL MAINTENANCE COSTS PACKAGED SOLUTIONS
Match warranty with the term of the lease
Add in service agreements from the Dealer to budget maintenance & repair costs
Bid a maximum repair cost for term
Warranty
CSA
Governmental solutions

37. ADVANTAGES Lease Buy Cash Flow? Control Maint. Costs? X Flexibility?
Total Ownership Cost? X X
Governmental solutions

38. FLEXIBILITY Governmental solutions Leasing
1. Return equipment to dealership at end of term
2. Replace with New equipment
3. Purchase or refinance machine
3. Look to profit from reselling equipment for higher
than committed return option
Finance (Purchase)
1. Have to trade-in or resell equipment
Governmental solutions

39. ADVANTAGES Lease Buy Cash Flow? Control Maint. Costs? X Flexibility?
Total Ownership Cost? X X X
Governmental solutions

40. TOTAL COST
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions

41. ADVANTAGES Lease Buy Cash Flow? Control Maint. Costs? X Flexibility?
Total Ownership Cost? X X X X
Governmental solutions

42. ISSUES Option/Residual represents Fair Market Value
Calculate implied interest rate to make sure it is reasonable
Read return conditions carefully
(I.e. hourly usage, undercarriage/tire wear requirements, etc.)
     
Governmental solutions

43. BENEFITS Governmental solutions Leasing preserves cash flow
Leasing provides lowest total cost for equipment use
Leasing can help project and control maintenance costs
Leasing allows flexible ownership options
Leasing insures fleet is new and updated
Leases can be tailored to meet specific needs
Leasing eliminates residual risk
Leasing allows 100% financing
Provides planned equipment replacement of customer’s fleet
Leased equipment may not have to be bid (See State Regs)
Governmental solutions