jim halloran ca reg affairs manager
DESCRIPTION
The California Off-Road Diesel Rule. Jim Halloran CA Reg Affairs Manager. Agenda. California Off-Road Rule The Off-Road rule The base rule The relief measures Questions. Count on Cat. Everyday. 2. Background. Diesel Risk Reduction Plan 75% reduction by 2010 85% reduction by 2020 - PowerPoint PPT PresentationTRANSCRIPT
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Jim HalloranCA Reg Affairs
Manager
The California Off-Road Diesel Rule
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2Count on Cat. Everyday.
Agenda
• California Off-Road Rule– The Off-Road rule
• The base rule• The relief measures
– Questions
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3Count on Cat. Everyday.
Background
• Diesel Risk Reduction Plan– 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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4Count on Cat. Everyday.
Tier 3 VS Tier 4
1996200120052011
2014
In 2011, NOx must be reduced by 50% and
PM by 90%
In 2014, NOx must be reduced by a further
80%; PM limits remain unchanged
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5Count on Cat. Everyday.
Off-Road Rule Delay
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, 2009. 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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6Count on Cat. Everyday.
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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7Count on Cat. Everyday.
Off-Road Rule – Fleet Average NOx
Nox Targets for Each Max HP GroupCompliance Date: March 1 of Year
25 - 49 HP
50 - 74 HP
75 - 99 HP
100 - 174 HP
175 - 299 HP
300 - 599 HP
600 - 750 HP
> 750 HP
2010 Large Fleets Only) 5.8 6.5 7.1 6.4 6.2 5.9 6.1 7.22011 Large Fleets Only) 5.6 6.2 6.7 6.0 5.8 5.5 5.6 6.82012 Large Fleets Only) 5.3 5.8 6.2 5.5 5.3 5.1 5.2 6.5
2013 5.1 5.5 5.7 5.1 4.9 4.7 4.8 6.12014 4.9 5.1 5.2 4.7 4.5 4.3 4.4 5.72015 4.6 4.8 4.8 4.3 4.1 3.9 4.0 5.32016 4.4 4.4 4.3 3.8 3.6 3.5 3.6 4.92017 4.2 4.1 3.8 3.4 3.2 3.1 3.2 4.52018 4.0 3.7 3.3 3.0 2.8 2.7 2.7 4.12019 3.7 3.4 2.8 2.6 2.3 2.3 2.3 3.82020 3.5 3.2 2.4 2.2 1.9 1.9 1.9 3.4
Table 1 - Large and Medium Fleet Nox Targets For Use in Calculating Fleet Target Rates (g/bhp-hr)
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8Count on Cat. Everyday.
Tier 2
Tier 4
Tier 3
Tier 4 Interim
Off-Road Rule – Fleet Average NOx
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9Count on Cat. Everyday.
Off-Road Rule – Fleet Average PM
PM Targets for Each Max HP GroupCompliance Date: March 1 of Year
25 - 49 HP
50 - 74 HP
75 - 99 HP
100 - 174 HP
175 - 299 HP
300 - 599 HP
600 - 750 HP
> 750 HP
2010 Large Fleets Only) 0.46 0.60 0.62 0.33 0.23 0.18 0.20 0.302011 Large Fleets Only) 0.46 0.60 0.62 0.33 0.23 0.18 0.20 0.302012 Large Fleets Only) 0.39 0.43 0.46 0.26 0.16 0.14 0.14 0.24
2013 0.39 0.43 0.46 0.26 0.16 0.14 0.14 0.242014 0.29 0.23 0.24 0.18 0.11 0.11 0.11 0.182015 0.29 0.23 0.24 0.18 0.11 0.11 0.11 0.182016 0.21 0.18 0.19 0.14 0.08 0.08 0.08 0.112017 0.21 0.18 0.19 0.14 0.08 0.08 0.08 0.112018 0.12 0.12 0.13 0.10 0.06 0.06 0.06 0.082019 0.12 0.12 0.13 0.10 0.06 0.06 0.06 0.082020 0.08 0.08 0.07 0.06 0.03 0.03 0.03 0.06
Table 2 - Large and Medium Fleet PM Targets For Use in Calculating Fleet Target Rates (g/bhp-hr)
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10Count on Cat. Everyday.
Off-Road Rule – Fleet Average PM
Tier 1 w/ DPF
Tier 2 w/ DPF
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11Count on Cat. Everyday.
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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12Count on Cat. Everyday.
Off-Road Rule – Compliance Process
Will fleet meet NOx fleet average target?
Turn over another engine
No
Will fleet meet PMfleet average target?
Yes
No
Yes Yes
Apply highest level VDECS to another engine
Will 20% of total hphave highest level VDECS
by compliance date?No
NoYes
DoneForYearWill 8%/10% of total hp
be turned over by compliance date?
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13Count on Cat. Everyday.
Compliance Options
EngineRepowers
AftertreatmentFilter/Catalysts
CleanerFuels
RentalEquipment
RetireReplace
EmissionsSolutions
Emissions Upgrade Group
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14Count on Cat. Everyday.
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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15Count on Cat. Everyday.
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 2010-11– 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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16Count on Cat. Everyday.
Legislative Credit Provisions
• Allows fleets to spread BACT requirements over time
• Special provisions for fleets that meet fleet averages in years 2011-13
• Currently required
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17Count on Cat. Everyday.
Legislative Change Impacts
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18Count on Cat. Everyday.
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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19Count on Cat. Everyday.
Guiding Principles
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20Count on Cat. Everyday.
Inventory Options
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21Count on Cat. Everyday.
Off-Road Options
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22Count on Cat. Everyday.
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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23Count on Cat. Everyday.
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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24Count on Cat. Everyday.
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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25Count on Cat. Everyday.
Questions?
Comments??
Concerns???
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26Count on Cat. Everyday.
Thank You!
Jim HalloranCA Regulatory Affairs Manager
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Governmental Finance
Solutions
Lease vs. Buy
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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
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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
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ADVANTAGES
Lease Buy• Cash Flow?• Control Maint. Costs? • Flexibility? • Total Ownership Cost?
Governmental solutions
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-Example- Need a Grader?
• Sale Price of $186,000• 5 year lease vs purchase (60 month term)• 1200-1500 hours usage per year
Governmental solutions
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CASH FLOW
$186,000
$41,358$24,840
$0
$40,000
$80,000
$120,000
$160,000
$200,000
Cash (1yr) Finance (5yr) Lease (5yr)
EXPENDITURE
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions
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CASH FLOW
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions
$41,358 finance
$24,840 lease
$105,264 Option
+Final LeasePayment of
$24,840$-
$40,000
$80,000
$120,000
$160,000
$200,000
1 2 3 4 5
Year
Finance vs. Lease
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ADVANTAGES
Lease Buy• Cash Flow?• Control Maint. Costs? • Flexibility? • Total Ownership Cost?
X
Governmental solutions
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CONTROL MAINTENANCE COSTS
CAT Motor Grader (1,500 hrs per yr)
COST PER HOUR
$70.74
$0
$20
$40
$60
$80
1 2 3 4 5 6YEAR
LEASE COST MAINT. COST
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions
*Maintenance fee may vary by Dealership
*
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CONTROL MAINTENANCE COSTSPACKAGED 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
Governmental solutions
Warranty
CSA
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ADVANTAGES
Lease Buy• Cash Flow?• Control Maint. Costs? • Flexibility? • Total Ownership Cost?
XX
Governmental solutions
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FLEXIBILITYLeasing
1. Return equipment to dealership at end of term 2. Replace with New equipment3. Purchase or refinance machine3. Look to profit from reselling equipment for higher
than committed return optionFinance (Purchase)
1. Have to trade-in or resell equipment
Governmental solutions
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ADVANTAGES
Lease Buy• Cash Flow?• Control Maint. Costs? • Flexibility? • Total Ownership Cost?
XXX
Governmental solutions
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TOTAL COST
$186,000$206,790
$228,546
$-
$50,000
$100,000
$150,000
$200,000
$250,000
Cash Finance (5yr) Lease (5yr)
TOTAL COST OF OWNERSHIP
CAT Motor Grader (1,500 hrs per yr)
Governmental solutions
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ADVANTAGES
Lease Buy• Cash Flow?• Control Maint. Costs? • Flexibility? • Total Ownership Cost?
XXX
X
Governmental solutions
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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
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BENEFITS• 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