California Crackdown, Part IV

|  July 01, 2010 |

Construction raises its hand

Voluntary diesel emission reduction programs gain steam

By Marcia Gruver Doyle and Mike Anderson

In countering the California Air Resources Board’s off-highway diesel emission rule, contractors point to programs already in place that emphasize voluntary approaches to getting emissions reductions for dirty diesel machines – including a long-standing program within California itself.

Long before the rest of the country even caught wind of California’s drive to lower emissions from diesel engines, the state was offering financial incentives for local fleet owners to retrofit or replace equipment.

Before and after: A DERA grant picked up $7,349 of the $15,300 it took to repower this 1996 Cat 928F loader owned by Cortis Excavating in Marine City, Michigan.

Initiated in 1998, the Carl Moyer Memorial Air Quality Standards Attainment Program – usually shortened to the Carl Moyer Program – has provided grant funding for the voluntary purchase of cleaner-than-required engines, equipment and emissions-reducing technologies. “Over its first seven years, the program provided $170 million to clean up approximately 7,500 engines throughout California,” CARB says in a 2008 executive summary on the program. As a result, CARB says, the state achieved emissions reductions of about 24 tons per day of oxides of nitrogen and one ton per day of toxic diesel particulate matter. That same year, an off-road equipment replacement category was added to Carl Moyer to accelerate the turnover of older machines.

In 2004, the California legislature approved continued funding of the Carl Moyer Program up to $141 million per year statewide through the year 2015. Implementation of the program is a cooperative effort between CARB and the local air pollution/air quality management districts throughout the state.

Cost-effectiveness

“To receive funding, one must submit an application for a project that claims surplus emission reductions – emission reductions beyond required by rule or regulation,” says industry consultant Drew Delaney, an expert in air quality issues with the firm Associates Environmental. “The program aims to reduce oxides of nitrogen, volatile organic compounds and particulate matter. Projects are ranked by their cost-effectiveness, which is the cost of the project divided by the tons of annualized surplus NOx emissions reduced. VOC and PM emission reductions are given NOx-reduction equivalence factors. Historically, projects which have been funded had an average cost-effectiveness around $3,000 per ton NOx reduced.”

Although voluntary, the Carl Moyer Program does have its detractors. “In a nutshell, it sucks,” says Skip Brown, president of Delta Construction, Sacramento. “In order to qualify for the funding, you have to guarantee a minimum number of hours on off-road equipment or miles on trucks. Even during the best of times, that minimum number of hours/miles was extremely difficult if not impossible to get. If you don’t, you don’t qualify for state/local funds to upgrade to meet regulations.”

And, further irking Brown, the hours and miles must be accumulated in the specific air district, he says. “Take the equipment out of the air district and you must pay back the money,” says Brown. Also, the program will pay for the additional costs of a new engine over the cost of rebuild. What they don’t say is that they don’t want to pay for the ‘extras’ sometimes necessary,” such as custom mounting, new heat exchangers and drive train modifications. “Oh, yeah, if there is a problem later because of this, you are on your own. Downtime on jobs due to the same: ditto.”

Complex but good

Harold Bobo, purchasing agent for Central Valley earthmoving giant Altfillisch Contractors, agrees the Carl Moyer Program has become more complex during his close to 10 years of involvement, but nonetheless has found participation to be beneficial. For contractors, the program “has evolved into a contract that guarantees hours, has equipment liens, requires the contractor to destroy the old engines, requires a contract term up to seven years, and requires the contractor to make up hours if the committed hours are not met in the contract,” says Bobo. “Sometimes, these requirements become too onerous, so the contractor refuses to sign the contract. We have returned some contracts unsigned and we have participated in some contracts.”

Bobo appreciates what he terms the “cooperative” approach of the district officials who administer the program, “especially during economic times like we are in now. They have certain requirements that need to be met, but they are willing to negotiate regarding some of the issues,” he says. “Recently, local districts have had funds for repowers, but few contractors are willing to participate due to the uncertainty of the future. So, the districts are becoming creative with their programs.”

As part of an ongoing Carl Moyer Program review, CARB staff is currently seeking input and discussion on existing administrative requirements and evaluating new procedures.

“The Carl Moyer Program in my opinion has been a huge success,” says Bobo. “It has cleaned up the air though the repowering of older diesel engines. I believe the contracts need to revert back to the original, more simple contracts that were much less regulatory. Regulators and rule makers need to always try to improve their control over the funds being dispersed, but they need to make it less restrictive.”

Bobo goes so far as to publicly thank the program for providing a funding source to help off-road equipment work cleaner. “We all need to work together toward this goal” of a cleaner environment, he says, “but the goal must be cost-effective.”

Meanwhile, down in Texas

“I’m not so worried about Texas using the CARB rule because we have a robust TERP program,” says Bob Lanham, vice president, Williams Brothers Construction, Houston.

Lanham is referring to the Texas Emissions Reduction Plan, which the state legislature created in 2001. The entirely state-supported effort funds a variety of programs designed to reduce NOx in the state’s nonattainment areas. Funds come from fees and surcharges on motor vehicle titles and construction equipment purchases, which for the past two years generated about $120 million per year.

“This year, those funds are going to be down quite a bit,” says Joe Walton, section manager for the implementation grant section, Texas Commission on Environmental Quality. Walton estimates in the next two years TERP will only see a total of $173 million due to declining revenues, a reflection of the down economy.

The program covers all heavy-duty diesel engines, including locomotive, marine, on-highway trucks and construction equipment. Construction equipment owners have made good use of TERP, with construction equipment representing about 54 percent of the projects, and 32 percent of the total dollars distributed, Walton says. More than 3,600 projects involving construction equipment have been funded to date.

One TERP-funded program is its Emissions Reduction Incentive Grants, awarded on a competitive basis. “For instance,” Walton says, “if a contractor has a dozer with a minimum of five years of remaining useful life, he can apply for a grant to get a new dozer that’s at least 25-percent cleaner.” If a contractor gets the grant, he has to destroy the old dozer, and submit photographic evidence he’s done so. Grantees also need to report the new machine’s hours for the next several years, to ensure they’ve attained their stated reduction in NOx. A new ERIG round opened up in May.

“When you’re buying a $130,000 truck and you reduce your costs by that much, it makes it advantageous. It’s a way to keep up with your fleets.”

– Don Braddock, division manager, Cherry Companies

 

A huge effort

One company that’s made use of TERP grants is Williams Brothers. The company has used TERP grants to replace more than 170 trucks with 2006 and 2007 models. On the off-road side, the company replaced the engines in 130 machines during 2006 to 2008, along with replacing 47 crawler crane engines. “It was a huge effort, and we had to go 100 miles to get the engines and parts to make the conversions,” Lanham says. “We’ve learned not to take quite so big a bite, because it stresses the support we get from manufacturers.”

TERP coverage of Williams Brothers’ actual costs varied according to the equipment involved. Lanham estimates the grants on average covered two-thirds of the cost of repowers and 80 percent of the truck replacement price. The state estimates the company’s actions resulted in a reduction of more than 3,000 tons of nitrogen oxide (NOx).

Another Houston contractor, Cherry Concrete Removal, a division of Cherry Companies, has since 2006 replaced seven trucks, ranging from long hauls to dump trucks, using TERP money. “We’ve got approval for four more this year, and depending on the economy we’ll probably end up doing three,” says Don Braddock, division manager. Braddock says the grants make a difference, offering as much as 40 percent of the replacement cost. “When you’re buying a $130,000 truck and you reduce your costs by that much, it makes it advantageous. It’s a way to keep up with your fleets.”

National funding

In 2008, Congress began funding the Diesel Emissions Reduction Act, a program designed to address emissions from existing fleets in poor air quality areas. A variety of emission- reduction strategies can be funded under DERA, including retrofits, cleaner fuels engine upgrades, idle reduction strategies, repowers and machine replacements.

Contractors cannot receive DERA money directly. Instead, they must partner with government agencies, non-profit organizations and/or industry groups in a fierce competition to get a portion of limited funds. In 2008, that funding was $49.2 million. The program got a $156-million boost from stimulus funding last year. Grant announcements for a combined 2009-2010 program unofficially were made in May, although official announcements were still pending at press time. But, says Allen Schaeffer, executive director of the Diesel Technology Forum, a non-profit group, “imagine what further benefits could be achieved if the program was fully funded at its authorized $200-million (annual) level.”

Falling short

DERA is designed to mitigate emissions from all diesel-powered sectors – including on-highway trucking, locomotive, marine, buses, municipal and off-road fleets. To date, construction off-road fleets have gotten a thin slice of the pie. Of the 2008 national grants, construction equipment only represented 865 machines out of the total 14,010 vehicles funded by the program. Two-thirds of the vehicles addressed were school buses and long-haul trucks (see chart on page 26).

Competition is intense for these funds. EPA estimates that demand for the national clean diesel funding assistance program exceeded available funds by 5:1 in FY 2008. There were more than 600 applications asking for about $2 billion during the 2009 grant process. And now the FY 2009 and 2010 funding levels have dropped to $32 million each year.

“DERA funding is not keeping pace with the program’s needs,” wrote a coalition of environmental, public health, government and industry groups in a March 30, 2010, letter to the U.S. House Committee on Appropriations. “DERA was authorized for $1 billion between FY 2007 to 2011, but only $492.2 million of those funds have been appropriated. EPA estimates they received $1 billion in high-quality requests from the ARRA solicitation that went unfunded after ARRA funds were exhausted.”

Associations involved

Awards for projects directed solely at construction equipment added up to about $7.8 million, or 5 percent of the total $156 million DERA funding given last year. Local contractor associations, however, are beginning to take advantage of this program. The Kentucky Association of General Contractors received a direct grant of $2 million in the last year’s stimulus round to retrofit and repower nearly 100 off-road machines and promote anti-idling practices at 100 construction sites statewide. In North Carolina, Mecklenburg County (Charlotte) was awarded $1.1 million for 28 or more repowers and six or more replacements of non-road construction equipment, stationary diesel engines and highway engines.

The Constructors Association of Western Pennsylvania partnered with the Allegheny County Health Department to receive $930,000 out of a $3.5 million grant. Jason Koss, director of industry relations for the Pennsylvania association, credits its partnership with local Cat dealer Cleveland Brothers Equipment and with the county for getting grant approval. “We identified a high percentage of the machines for which Cat had off-the-shelf retrofit solutions in our membership,” he says.

In addition to Cleveland Brothers, which did engine repowers and installed engine upgrade groups (EUGs), CAWP also worked with Penn Detroit Diesel to repower five Blaw-Knox pavers with John Deere engines, and with Engine Control Systems to provide diesel particulate filters (DPFs). In total, 28 machines owned by 10 contractors are receiving an emissions upgrade. The grant paid 75 percent of the repowers and 100 percent of the DPFs and EUGs, and about half of machines under contract are done.

“It’s a great way to help our members upgrade their equipment,” Koss says, noting that local pressures are building for contractors to address their fleets. “The City of Pittsburgh currently is discussing implementing an off-road retrofit requirement on city projects,” he comments.

Getting your slice of the pie

But to get their slice of the pie, construction companies must partner with an association, government agency or non-profit organization. Koss advises contractor groups to join local and/or regional diesel workgroups, network with potential funding agencies, rely on expert advice from vendors and government agencies adept at navigating government hoops, and be proactive and persistent.

“If you keep it voluntary, contractors will make the right business decisions for themselves. If you combine these things with common sense, they’ll do the right thing.”

– Carol Fulton, associate executive director, AGC of New Jersey

Several organizations are waiting on word on their 2009/2010 DERA grant application, including the AGC of New Jersey, which took the bones of a previous proposal that included Caterpillar, John Deere, Cummins and Komatsu, and used it to partner with the Construction Industry Advancement Program, founded by three construction associations. The group is asking for a $1.6-million grant to retrofit 40 upgrade 75 machines.

Carol Fulton, associate executive director, AGC of New Jersey, says their grant applications show her contractor members are taking advantage of volunteer opportunities. “If you keep it voluntary,” she comments, “contractors will make the right business decisions for themselves. If you combine these things with common sense, they’ll do the right thing.”

Mike Lazzara, product support sales manager with Michigan Cat, is also a proponent of the DERA grants. Michigan Cat participated in a 2008 grant headed by the Clean Energy Coalition of Ypsilanti, Michigan. Under the $250,000 grant, now just wrapping up, the dealer repowered 20 machines, taking them from Tier 0 to Tier 1. “The cost of going from a Tier 0 to a Tier 1 is manageable,” Lazzara says, “and once you get it to Tier 1, you can clean a machine up further with a DPF.”

The grant’s offer to pay up to 50 percent of this repower interested Joe Cortis, vice president of Cortis Excavating, Marine City, Michigan, one of the contractors selected to participate in the program. Cortis, a site work, utility and trucking contractor, wanted to repower a 1996 928F loader with 13,000 hours on it. “We knew we would have to replace this machine or do major repairs on it, so the fact they picked up $7,349 of the $15,300 engine made it attractive,” Cortis says. “And we anticipate we’ll get another 10,000 hours out of the machine.”

If grant money is available, Cortis would like to repower one of his excavators. “We would definitely do it if it was offered to us,” he says.

Michigan Cat has again partnered with the Clean Energy Coalition to apply for another grant, this time for $1.5 million. The grant request would involve installing emission upgrade groups, which upgrade certain Cat engines to an improved emissions level by changing out the turbocharger, fuel pump/governor, nozzles, cylinder pack and after coolers (if applicable). “With repowers under these grants, you have to destroy the old engine,” Lazzara says. “With EUGs, since you’re putting new components on an existing engine, you don’t have to waste it.”

Lazzara spoke at the Associated Equipment Distributor’s annual meeting in January, encouraging other dealers to pay attention to DERA grants. “The more we as an industry recognize these opportunities,” he says, “the more proposals there will be from the construction industry, and EPA will realize there’s a huge demand and interest level here. Plus, you’re helping out your customer in this economy to have machines in his fleet a bit longer.” EW

What DERA’s National Clean Diesel Funding Assistance Program will fund

Verified retrofit technologies: Up to 100% of eligible exhaust controls and engine upgrades

Verified/certified cleaner fuel use: The cost differential between eligible cleaner fuels and conventional diesel fuels

Verified idle reduction technologies: Up to 100% of the cost of eligible idle reduction technologies

Verified aerodynamic technologies and low rolling resistance tires: Up to 100% of the cost

Certified engine repower: Up to 75% of the cost (labor and equipment)

Certified vehicle/equipment replacement: The incremental cost of a newer, cleaner vehicle or machine, up to 25% of the cost of an eligible replacement vehicle or machine

(Seventy percent of program funding goes to the National Clean Diesel Funding Assistance Program, detailed above, the National Clean Diesel Emerging Technologies Program and the SmartWay Clean Diesel Finance Program. Thirty percent of the funding goes to a State Clean Diesel Grant Program that makes funds directly available to states interested in establishing new diesel emission reduction programs.)

 

FOR MORE INFO

California’s Carl Moyer Memorial Air Quality Standards Attainment Program,

www.arb.ca.gov/msprog/moyer/moyer.htm

Texas Emissions Reduction Plan, www.tceq.state.tx.us/implementation/air/terp

Overview of DERA program, www.epa.gov/cleandiesel

For an example of a state diesel emission reduction program, check out the North Carolina Clean Construction Leading to Early Adoption of Diesel Emission Reductions (LEADER) program, daq.state.nc.us/motor/leader/

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