| Speculation about the future of California's diesel | | | | Stationary Engines and Portable Equipment includes |
| regulations is rampant right now, with the furor over | | | | stationary engines such as those used in |
| a pseudo PhD, allegations regarding the inaccuracy of | | | | emergency-standby generators, prime generators, |
| underlying data, debate on the economic effect on | | | | and agricultural irrigation pumps, construction |
| industries such as trucking, construction, and | | | | equipment, portable equipment, such as portable |
| agriculture, and the recent addition of Proposition 23 | | | | generators and pumps, and transportation |
| on the November ballot, which, if passed, would | | | | refrigeration units (TRUs). |
| suspend/delay implementation of the California Air | | | | Although regulations assigned per the above |
| Resources Board's regulations, created to address | | | | categories, implementation of regulations has been |
| EPA concerns of the federal government. While | | | | rolled out much more along industry lines, with |
| those of us in California watch the process, the rest | | | | municipalities, marine industry and construction among |
| of the nation seems just as interested-Many other | | | | the first to be regulated. Also underway is |
| states, also out of compliance with the Federal Clean | | | | implementation for agriculture. While CARB has not |
| Air Act, are being forced to consider diesel emission | | | | yet implemented regulation for agricultural equipment |
| rules as well. | | | | (mobile, stationary or portable), such regulation is |
| As an equipment appraiser, I have multiple and | | | | inevitable. |
| on-going opportunities to appraise diesel equipment | | | | As an interim measure CARB has developed a |
| and machinery. It's a rare appraisal, in fact, that does | | | | phase-in period for effected equipment which |
| not include some variety of diesel-powered | | | | gradually increases the requirements until 2023 when |
| equipment, and the current CARB (California Air | | | | almost all engines manufactured prior to 2010 will be |
| Resources Board) Diesel Risk Reduction Plan includes | | | | illegal to operate in the state of California. During this |
| just about all of them. In the course of appraising | | | | phase-in period, older engines can be retrofitted with |
| diesel equipment, I've come across lots of folks who | | | | a PM filter (at an approximate cost of $15,000 per |
| are confused about what the regulations are, what | | | | unit). In addition, operators with 3 or fewer diesel |
| the process of implementation is, and how diesel | | | | engines (a category that includes almost 50% of the |
| owners and operators are required to respond to the | | | | affected diesel engines in California) are given an |
| regulations. | | | | additional grace period to report compliance. |
| Answers to these questions are critical because all | | | | Once again, the status of agricultural equipment |
| California industries-from commercial trucking to | | | | relative to the 2023 date is unclear at this date. Does |
| agriculture and marine, including sales and operation of | | | | the 2023 compliance date for all engines also include |
| equipment such as off-road vehicles and stationary | | | | agricultural equipment? It's interesting to note that |
| equipment-are encompassed by the RRP. Even | | | | John Deere will introduce a tier-4 tractor engine this |
| operators with one diesel engine and sellers of such | | | | fall. |
| assets (auctioneers and equipment dealers) will | | | | Due to the complex nature of these regulations and |
| eventually be affected. As a result, the value of all | | | | the fact that they continue to evolve, it would not |
| diesel-powered equipment is likely to be materially | | | | be prudent to print a detailed summary of specific |
| influenced as it becomes obsolete and illegal to | | | | regulations here. For complete up-to-date details of |
| operate in the state. | | | | the regulations please go to the California |
| CARB regulations do not, however, mandate an | | | | government's diesel website or call (866) 6DIESEL |
| overnight shutdown of diesel engine use. Rather, the | | | | (634-3735). |
| regulations are intended to be implemented in a series | | | | Financial Implications |
| of steps based on industry, as discussed later in this | | | | Opinions of economic effect appear just as diverse |
| article. This means that currently, many industries are | | | | as the regulation itself. I interviewed many players in |
| not yet affected by these regulations, or are only | | | | the diesel engine marketplace and could not find a |
| partially affected; in fact, within all industries, diesel | | | | consensus of opinion about the financial weight of |
| vehicles driven less than a certain number of miles a | | | | the regulations. |
| year are exempt from these regulations at this time. | | | | A representative at Ritchie Brother in Dunnigan, CA, |
| If regulations continue to be implemented as planned, | | | | claims that the auction company has seen no change |
| diesel owners and operators should plant to take | | | | in the price of diesel-powered equipment relative to |
| advantage of CARB allowances for phase-in plans. | | | | CARB regulation. They claim that they have |
| Phase-ins, based on a fleet-averaging rule, are | | | | compared auction results with those outside of the |
| designed to be implemented from 2011 to 2014, with | | | | state of CA and have not seen a material difference |
| grant funds available to off-set the cost of | | | | in the sales prices of similar assets. One explanation |
| compliance. Businesses within each industry are | | | | offered is that any pressure from CARB regulations |
| encouraged to develop their diesel emissions control | | | | has been offset by demand in Asia, India and other |
| (phase-in) strategy based on a spreadsheet available | | | | points in the mid- and far-east. Others in the retail |
| from the CARB website. CARB-approved installers | | | | heavy truck industry concur with this claim. |
| can assist owners and operations with the data | | | | Some industry organizations, on the other hand, feel |
| needed for completing a phase-in plan. | | | | quite confident that CARB regulations will have a |
| CARB RRP applies to all diesel equipment operating in | | | | negative financial influence on their industries. |
| the state of California regardless of its base of | | | | The Construction Industry Air Quality Coalition, for |
| operation. This includes, for instance, interstate | | | | instance, estimates a 20% reduction in fleet size, |
| trucks, trains and marine equipment while they are in | | | | which would reduce the ability to perform |
| California. | | | | construction work. This would significantly reduce |
| Regulatory Background | | | | asset values which would, in turn, significantly reduce |
| In 1998, when California failed to meet National | | | | the collateral available to support performance bonds. |
| Ambient Air Quality standards, the federal | | | | Without performance bonds, a company's ability to |
| government threatened the state's share of federal | | | | continue construction would diminish dramatically. |
| highway funds. It was in response to that threat that | | | | While not providing facts and figures, the Associated |
| the California Air Resources Board adopted the | | | | General Contractors of America (states in |
| current Diesel Risk Reduction Plan (RRP) in | | | | unequivocal terms: "The rule was written in a manner |
| September 2000. RRP recommends many control | | | | that the industry needed to bear an enormous |
| measures to reduce risks associated with diesel | | | | financial burden while cleaner diesel equipment was |
| particulate matter (PM), designed to achieve a 75% | | | | being developed and built by the equipment |
| reduction in diesel particulate matter this year, with | | | | manufacturers." |
| an 85% reduction by 2020, by regulating all diesel | | | | Driving toward a Cleaner California (a coalition of |
| engines in all industries. | | | | truck owners, farmers, construction contractors and |
| Industry Implications | | | | other business and community leaders) estimates |
| RRP addresses nearly every size and application of | | | | that these regulations could negatively affect |
| diesel-powered equipment operated in the state in | | | | (reduce) the more than 1.5 million trucks and buses in |
| order to reduce oxides of nitrogen (NOx) and diesel | | | | use on roads, highways and farms. |
| PM. CARB's regulations impose aggressive NOx and | | | | Working with CARB RRP |
| PM emissions reduction targets to any person or | | | | As the drama around CARB regulations continues to |
| entity that sells, leases, owns, purchases, or operates | | | | unfold, owners and operators of diesel equipment |
| any diesel-powered equipment over 25 horsepower. | | | | often find themselves confused about the influence |
| The diesel emission regulations issued by CARB are | | | | of these regulations on the value and use of their |
| as vast and varied as the many different ways that | | | | equipment. If you have questions about how to |
| diesel engines are used. Consequently, CARB | | | | address these diesel regulations, I'd suggest you |
| regulations, while created to regulate types of | | | | contact a CARB-approved installer. An approved |
| equipment, have been primarily implemented by | | | | installer can tell you what exact retro-fit requirements |
| equipment use, or industry, which of course includes | | | | are needed for your specific equipment in your |
| the various types of equipment. | | | | industry as well as the deadline for installation and the |
| CARB categorizes equipment type by "mobile | | | | cost. In addition, they can be extremely helpful in |
| vehicles and equipment" and "stationary engines and | | | | developing a diesel emissions control (phase-in) |
| portable equipment." | | | | strategy. CARB provides a list of these businesses |
| Mobile Vehicles and Equipment includes off-road: | | | | and individuals. |
| cargo handling equipment in ports and rail-yards, | | | | And if you need a diesel equipment appraisal, be sure |
| locomotives, construction equipment; on-road: | | | | to find a qualified equipment appraiser who has some |
| heavy-duty trucks, busses for public transit, schools | | | | knowledge and understanding of how the uncertain |
| and shuttles; and marine: commercial harbor craft, | | | | climate of CARB RRP is influencing diesel equipment |
| recreational craft, commercial marine vessels. | | | | values. |