(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty of up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards is subject to a civil penalty of $5,000 per violation. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

This bill would increase those penalties to up to $37,500 per violation. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of a penalty for the violation of specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board, and making the products compliant with specified laws, as conditions for the continued sale of those products.

This bill would authorize the state board to order a manufacturer of motor vehicles to bring the vehicles into compliance with the emissions configuration to which they were certified. The bill would authorize the state board to require the manufacturer to be in compliance with the state boards order as a condition for the continued sale of motor vehicles in the state.

(2)Existing law prohibits a person who is a state resident or who operates an established place of business within the state from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet specified emissions standards. Existing law provides that a person who violates specified provisions relating to transactions of new motor vehicles or new motor vehicle engines is subject to a civil penalty of up to $5,000 per vehicle.

This bill instead would prohibit any person from offering for sale, introducing into commerce, importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet those specified emissions standards.

This bill would increase the civil penalty to up to $37,500 per violation and up to $10,000 for a dealer, as defined, for violating those specified provisions relating to transactions of new motor vehicles or new motor vehicle engines. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of the penalty, and making the motor vehicles compliant with specified laws, as conditions for the continued or further sale in the state of those motor vehicles.

This bill would require the state board to limit to $5,000 a specified civil penalty imposed on a manufacturer who does not meet the requirements of specified regulations that require manufacturers to have a specified percentage of their new motor vehicle sales be zero-emission vehicles.

(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty of up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards is subject to a civil penalty of $5,000 per violation. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

This bill would increase those penalties to up to $37,500 per violation. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of a penalty for the violation of specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board, and making the products compliant with specified laws, as conditions for the continued sale of those products.

This bill would authorize the state board to order a manufacturer of motor vehicles to bring the vehicles into compliance with the emissions configuration to which they were certified. The bill would authorize the state board to require the manufacturer to be in compliance with the state boards order as a condition for the continued sale of motor vehicles in the state.

(2)Existing law prohibits a person who is a state resident or who operates an established place of business within the state from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet specified emissions standards. Existing law provides that a person who violates specified provisions relating to transactions of new motor vehicles or new motor vehicle engines is subject to a civil penalty of up to $5,000 per vehicle.

This bill instead would prohibit any person from offering for sale, introducing into commerce, importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet those specified emissions standards.

This bill would increase the civil penalty to up to $37,500 per violation and up to $10,000 for a dealer, as defined, for violating those specified provisions relating to transactions of new motor vehicles or new motor vehicle engines. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of the penalty, and making the motor vehicles compliant with specified laws, as conditions for the continued or further sale in the state of those motor vehicles.

This bill would require the state board to limit to $5,000 a specified civil penalty imposed on a manufacturer who does not meet the requirements of specified regulations that require manufacturers to have a specified percentage of their new motor vehicle sales be zero-emission vehicles.

(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty of up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards is subject to a civil penalty of $5,000 per violation. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

This bill would increase those penalties to up to $37,500 per violation or vehicle. violation. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of a penalty for the violation of specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board be a condition board, and making the products compliant with specified laws, as conditions for the continued sale by a manufacturer or distributor of products that are alleged or found to be in violation by the state board. of those products.

This bill would authorize the state board to order a manufacturer of motor vehicles to bring the vehicles into compliance with the emissions configuration to which they were certified. The bill would authorize the state board to require the manufacturer to be in compliance with the state boards order as a condition for the continued sale of motor vehicles in the state.

(2)Existing law prohibits a person who is a state resident or who operates an established place of business within the state from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet specified emissions standards. Existing law provides that a person who violates specified provisions relating to transactions of new motor vehicles or new motor vehicle engines is subject to a civil penalty of up to $5,000 per vehicle.

This bill instead would prohibit any person from offering for sale, introducing into commerce, importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet those specified emissions standards.

This bill would increase the civil penalty to up to $37,500 per violation and up to $10,000 for a dealer, as defined, for violating those specified provisions relating to transactions of new motor vehicles or new motor vehicle engines. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would authorize the state board to require the payment of the penalty be a condition penalty, and making the motor vehicles compliant with specified laws, as conditions for the continued or further sale in the state by that manufacturer or distributor of motor vehicles that are alleged or found to be in violation by the state board. of those motor vehicles.

(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty of up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards is subject to a civil penalty of $5,000 per action. violation. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

This bill would increase those penalties to up to $37,500 per action violation or vehicle. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would require that authorize the payment of a penalty for the violation of specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board be a condition for the continued sale by a manufacturer or distributor of products that are subject to regulation alleged or found to be in violation by the state board.

This bill would authorize the state board to order a manufacturer of motor vehicles to bring the vehicles into compliance with the emissions configuration to which they were certified. The bill would require authorize the manufacturer to be in compliance with the state boards order as a condition for the continued sale of motor vehicles in the state.

(2)Existing law prohibits a person who is a state resident or who operates an established place of business within the state from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet specified emissions standards. Existing law provides that a person who violates specified provisions relating to transactions of new motor vehicles or new motor vehicle engines is subject to a civil penalty of up to $5,000 per vehicle.

This bill instead would prohibit any person from offering for sale, introducing into commerce, importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet those specified emissions standards.

This bill would increase the civil penalty to up to $37,500 per action violation and up to $10,000 for a dealer, as defined, for violating those specified provisions relating to transactions of new motor vehicles or new motor vehicle engines. The bill would require the state board to adjust those maximum penalties for inflation, as specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would require that authorize the payment of the penalty be a condition for the continued sale in the state by that manufacturer or distributor of motor vehicles by the manufacturer or distributer in the state. that are alleged or found to be in violation by the state board.

(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty of up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards shall be is subject to a civil penalty of $5,000 per action. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

This bill would increase those penalties to up to $37,500 per action or vehicle. The bill would require the state board to adjust those maximum penalties for inflation, as specified. specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would require that the payment of a penalty for the violation of specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board be a condition for the continued sale by a manufacturer or distributor of products that are subject to regulation by the state board. The bill would exempt these provisions from the Administrative Procedure Act.

This bill would authorize the state board to order a manufacturer of new motor vehicles to bring the vehicles into compliance with the emissions configuration to which they were certified to meet. certified. The bill would require the manufacturer to be in compliance with the state boards order as a condition for the continued sale of motor vehicles in the state.

(2)Existing law prohibits a person who is a state resident or who operates an established place of business within the state from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet specified emissions standards. Existing law provides that a person who violates specified provisions relating to transactions of new motor vehicles or new motor vehicle engines is subject to a civil penalty of up to $5,000 per vehicle.

This bill instead would prohibit any person from advertising, offering for sale, introducing into commerce, importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle, new motor vehicle engine, or motor vehicle with a new motor vehicle engine for use, registration, or resale in the state unless the motor vehicle engine or new motor vehicle has been certified to meet those specified emissions standards.

This bill would increase the civil penalty to up to $37,500 per action and up to $10,000 for a dealer, as defined, for violating those specified provisions relating to transactions of new motor vehicles or new motor vehicle engines. The bill would require the state board to adjust that penalty those maximum penalties for inflation, as specified. specified, and would exempt those adjustments from the Administrative Procedure Act. The bill would require that the payment of the penalty be a condition for the continued sale of motor vehicles by the manufacturer or distributer in the state. The bill would exempt these provisions from the Administrative Procedure Act.

(1)Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that a person who violates specified vehicular air pollution statutes or specified orders, rules, or regulations of the state board is subject to a civil penalty up to $500 per vehicle. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards shall be subject to a civil penalty of $5,000 for each such per action. Existing law provides that a manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board is subject to a civil penalty of $50 per vehicle.

Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards shall be subject to a civil penalty of $5,000 for each such action.

This bill would declare the intent of the Legislature to enact legislation that would require the state board to update civil penalties to ensure state law provides appropriate penalties, accounting for the intent of the violator, for introducing into commerce in California vehicles that do not meet emission standards adopted by the state board.

Existing law requires the State Air Resources Board to adopt and implement standards for the control of emissions from new motor vehicles that the state board finds to be necessary and technologically feasible. Existing law prohibits a new motor vehicle from being sold in the state that does not meet the emissions standards adopted by the state board. Existing law provides that any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards shall be subject to a civil penalty of $5,000 for each such action.

This bill would declare the intent of the Legislature to enact legislation that would update civil penalties to ensure state law provides appropriate penalties, accounting for the intent of the violator, for introducing into commerce in California vehicles that do not meet emission standards adopted by the state board.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 1685

Author:(Gomez)

As Amended Ver:August 18, 2016

Majority vote

Original Committee Reference: TRANS.

SUMMARY: Updates civil penalties for violations of California Air Resources Board (ARB) regulations, orders, or rules, to bring penalty assessments into alignment with those of the United States Environmental Protection Agency (U.S. EPA).

The Senate amendments:

1. Provide for penalties "up to" or "not to exceed" specified maximum limits.
2. Provide that fines for certain dealer violations shall not exceed $10,000 for each action.
3. Provide that fines for manufacturers who fail to meet the requirements to produce a specified percentage of their new motor vehicle sales as zero-emission vehicles be limited to $5,000.
4. Make related, technical changes.

AS PASSED BY THE ASSEMBLY, this bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $500 to a maximum of $37,500 per action and requires, for violations committed by a manufacturer or distributor, that payment of penalties be a condition for further sales by the manufacturer or distributor.
2. Provides that violations involving portable fuel containers or small off-road engines remain subject to civil penalties of $500 per unit.
3. Expands penalties for selling motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state and includes activities such as advertising and introducing commerce into the state.
4. Deletes provisions defining an established place of business as a place actually occupied either continuously or at regular periods in order to include Internet-based businesses.
5. Expands penalties from a maximum of $5,000 to $37,000 per action for violations of ARB regulations committed by a manufacturer or distributor and requires that payment of penalties be a condition to further motor vehicle sales by the manufacture or distributor in California.
6. Increases from $5,000 to $37,500, per action, the penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet applicable emissions standards.
7. Authorizes ARB to order a manufacturer to bring its vehicles into emissions configuration to which they were certified and compliance with this requirement be a condition of further sale of motor vehicles in California.
8. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS: Both nationally and statewide, the transportation sector is known to be a major contributor of criteria pollutants and climate change emissions. To address transportation sector emissions, both ARB and U.S. EPA regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain emissions standards. In California, manufacturers must additionally demonstrate compliance with state air-quality standards and manufacturers who fail to comply are subject to civil penalties and other enforcement actions.

To be certified by ARB, a vehicle must demonstrate that its exhaust and emission-control systems are durable and comply with the emission standards for the vehicle's useful life. In California, an application for certification must be submitted to, and approved by, both the ARB and U.S. EPA concurrently.

On September 3, 2015, representatives of Volkswagen (VW) admitted to the U.S. EPA and ARB that a large number of their vehicle engines had been designed and manufactured with a "defeat device" designated to bypass, or render inoperative, elements of the vehicles' emissions control system. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

In a joint hearing entitled Volkswagen's "Defeat Device:" Update and Implications for California held by the Senate Transportation and Housing and Environmental Quality Committees on Tuesday March 8, 2016, the Legislature was updated with regard to how the defeat device was discovered, VW's admissions, ARB and U.S. EPA's actions, the status of federal litigation, and the overall effect of the issue on California's air quality, among other things. In the background paper for the hearing, the Committees encouraged the Legislature to consider creating stronger penalties to discourage non-compliance by automobile manufacturers. It was pointed out federal penalties are substantially higher that state penalties for non-compliance and that the penalties were set in the 1970 and are not indexed to inflation. The Committees suggested that existing ARB penalties do not provide sufficient deterrent, particularly for egregious actions to circumvent emissions requirements, such as in case of VW.

To ensure that California's air quality laws and regulations are followed, and to better align fines with federal penalties, the author has introduced this bill which would increase the maximum penalties for mobile source violations. By increasing ARB's fines, the author believes that overall compliance will be improved. Specifically, this bill would increase the maximum penalty for mobile source violations from $500 to $37,500, while retaining the current lower penalty amount for smaller, less egregious, violations and violations for lower-value equipment such as off-road engines and fuel containers. Additionally, this bill would modernize statutes to allow penalties to be extended to manufacturers outside of the state to better reflect modern business practices whereby vehicles are advertised and sold over the Internet (from locations outside of California). Lastly, this bill would allow ARB to periodically update mobile source penalties by indexing them to inflation thereby ensuring that penalties maintain their deterrent effect over time.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093 FN: 0004742

 THIRD READING  

Bill No: AB 1685

Author:

:

Vote:

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 4-2, 6/8/16

AYES: Wieckowski, Hill, Leno, Pavley

NOES: Gaines, Bates

NO VOTE RECORDED: Jackson

SENATE TRANS. & HOUSING COMMITTEE: 7-4, 6/21/16

AYES: Beall, Allen, Leyva, McGuire, Mendoza, Roth, Wieckowski

NOES: Cannella, Bates, Gaines, Galgiani

SENATE JUDICIARY COMMITTEE: 5-2, 6/28/16

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Moorlach, Anderson

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 48-29, 5/12/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill increases from $500 to $37,500 the maximum civil penalty that may be imposed upon a person who violates specified provisions of California’s Vehicular Air Pollution Control statute, or any order, rule, or regulation of the California Air Resources Board adopted pursuant to those provisions. This bill provides that the Board shall adjust the maximum civil penalty for inflation based on the California Consumer Price Index. This bill provides certain exceptions to the increased maximum civil penalty, including violations involving portable fuel containers or small off-road engines, and provides that automobile dealers who violate specified provisions of the statute shall be subject to a civil penalty not to exceed $10,000. This bill adjusts from per vehicle to per violation the frequency for which certain penalties may be imposed.

Senate Floor Amendments of 8/18/16 clarify that the increased maximum penalties do not apply to failure to meet zero-emission vehicle (ZEV) credit requirements. In addition, the amendments re-define that the civil penalties apply per action of a violator, to be further defined in regulations, and clarify that both payment of penalties and making vehicles compliant with emissions control regulations may be required for continued vehicle sales in the state.

ANALYSIS:

Existing law:

1. Requires that persons who violate any California Air Resources Board (ARB) order, rule, or regulation, where there is not a penalty described for the specific violation, shall be subject to a civil penalty not to exceed $500 per vehicle, portable fuel container, spout, engine, or other unit subject to regulation and that the penalty be collected by the State Treasurer and deposited into the Air Pollution Control Fund. (Health and Safety Code §43016)
2. Prohibits residents or businesses from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle or vehicle engine for use or resale in the state unless the engine has been certified compliant with ARB standards, as specified, with violations set at $5,000 per vehicle. (HSC §43151)
3. Prohibits new vehicles from being sold in California that do not meet the emissions standard adopted by ARB. (HSC §43211)
4. Provides penalties of $5,000 per action, for manufacturers who sell, attempt to sell, or offer for sale, a new vehicle that does not meet ARB emission standards. (HSC §43211)
5. Provides that manufacturers or distributors who do not comply with emission standards or test procedures adopted by ARB may be subject to civil penalties of $50 per vehicle that is not in compliance and that no further sales of the vehicles can take place until the penalty is paid. (HSC §43212)
6. Provides, pursuant to federal law, that violators be subject to civil penalties up to $37,500 per non-compliant vehicle or engine, $3,750 per tampering event or sale of defeat device, and $37,500 per day for reporting and recordkeeping violations. (42 U.S. Code §7524; 69(30) Federal Register 7121 [Feb. 13, 2004]; 73(239) Federal Register §75340 [Dec. 11, 2008]; 78(215) Federal Register §66643 [Nov. 6, 2013])

This bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $50 per vehicle, or $500 or $5,000 per action, depending on the provision, to a maximum of $37,500 per vehicle or action, as specified.
2. Authorizes, for violations committed by a manufacturer or distributor, that payment of penalties may be a condition for further sales by the manufacturer or distributor in the state of vehicle models that are alleged or found to be in violation by the state board.
3. Specifies that violations involving portable fuel containers or small off-road engines retain maximum civil penalties of $500 per unit.
4. Expands prohibitions for commerce in new motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state.
5. States that the penalty for failure to meet ZEV credit requirements, as specified, shall not exceed $5,000 per ZEV credit.
6. Increases from $5,000 to $37,500, per violation, the maximum penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet other applicable emissions standards.
7. Authorizes ARB to order a manufacturer to bring its vehicles into compliance with the emissions configuration they were certified to meet, and specifies that compliance with this order may be a condition of further sale of motor vehicles in California of vehicle models that are alleged or found to be in violation by the state board.
8. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.
9. Makes related clarifying amendments.

Background

1. Federal and state air quality laws. The federal Clean Air Act and its implementing regulations are intended to protect public health and environmental quality by limiting and reducing pollution from various sources. Under the Clean Air Act, the United States Environmental Protection Agency (US EPA) establishes National Ambient Air Quality Standards (NAAQS) that apply to outdoor air throughout the country. These federal standards exist for several air pollutants due to their negative impact on public health when above specified thresholds, including ozone, particulate matter (PM), nitrogen oxides (NOx), sulfur oxides, carbon monoxide, and lead. US EPA reviews each NAAQS at five-year intervals to ensure that the standards are based on the most recent scientific information.

Regions that do not meet the national standards for any one of the standards are designated nonattainment areas. The Clean Air Act sets deadlines for attainment based on the severity of nonattainment and requires states to develop comprehensive plans, known as the state implementation plan, to attain and maintain air-quality standards for each area designated nonattainment for an NAAQS.

California has some of the most severe air pollution problems in the country. In particular, the South Coast and San Joaquin air basins, which contain over half of the state’s population, are extreme nonattainment regions (the highest degree of severity) for ozone pollution and are both nonattainment regions for PM.

1. Why transportation emissions standards matter. Nationally and statewide, the transportation sector is responsible for a major fraction of air pollution, especially NOx (including NO and NO₂), which contributes to both ozone and PM formation. People who live and work in closer proximity to roadways are especially exposed to and impacted by this pollution. Nationwide, approximately 16% of U.S. housing units (including 48 million people) are located within 300 feet of a major highway, railroad, or airport, and the affected population is disproportionately economically disadvantaged and non-white.

Ground-level ozone (or tropospheric ozone) is a primary component of smog and is formed from the reaction of NOx with volatile organic compounds in sunlight. Ozone has a number of negative health effects including irritated respiratory system, reduced lung function, aggravated asthma, and inflammation and damage of the lining of the lungs. Active children are at highest risk from ozone exposure.

PM can be directly emitted or can be formed in the atmosphere when gaseous pollutants such as sulfur dioxide and NOx react to form fine particles. Very fine particulate matter is particularly dangerous since it burrows deep into the lungs where it can enter the bloodstream and harm the heart and other organs. Fine particulate pollution poses an especially critical health danger for children, the elderly, and people with existing health problems. Exposure to PM 2.5 (i.e., particles or droplets that are 2.5 µm or less in diameter) is also linked to cardiovascular disease. A 2010 ARB analysis based on scientific assessments by US EPA reported that approximately 9,000 people in California are estimated to die prematurely each year as a result of exposure to fine particle pollution.

In addition, the specialized cancer agency of the World Health Organization, the International Agency for Research on Cancer, classified outdoor air pollution, and PM as a major component of outdoor air pollution, as carcinogenic to humans.

1. US EPA and ARB vehicle testing requirements. To address transportation sector emissions, the federal Clean Air Act authorizes the US EPA to establish and regulate standards for hydrocarbons, carbon monoxide, NOx, and PM from mobile sources of pollution. Because of its pre-existing vehicle-emission standards and motor vehicle air pollution problems, California is also authorized under the Clean Air Act to implement separate stricter state mobile emission standards. State law assigns ARB with primary responsibility for control of mobile-source air pollution. Both US EPA and ARB regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain federal and state emissions standards. In particular, manufacturers must demonstrate that its vehicle’s exhaust and emission-control systems are durable and comply with the emission standards for the vehicle’s useful life. Only after going through this “certification of conformity” (COC) process are vehicles legal for sale. Manufacturers that fail to comply are subject to civil penalties and other enforcement actions. The current maximum federal penalty for violating the Clean Air Act through the sale of new vehicles without a valid COC is $37,500 per violation.

In California, applications for certification must be concurrently submitted to and approved by both the ARB and US EPA. By obtaining and testing a limited sample of vehicles from a test group or engine family, and attempting to duplicate the manufacturers’ vehicle emissions certification tests, ARB’s In-Use Compliance Program aims to ensure that manufacturers’ vehicles meet emissions standards throughout their useful lives.

1. The Volkswagen case and its lessons. As described in the background paper of the Joint Oversight Hearing by the Senate Transportation and Housing and Environmental Quality Committees (Volkswagen’s “Defeat Device:” Update and Implications for California, March 8, 2016), a 2014 study by academic researchers, followed by an expanded 2015 investigation by ARB and US EPA of discrepancies between emissions during stationary tests and while driving, led to admission by Volkswagen that several of their “clean diesel” engines had been designed with software-based “defeat devices” to bypass key elements of the emissions control systems. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/19/16)

American Lung Association in California

Bay Area Air Quality Management District

Breathe California

California Air Pollution Control Officers Association

CALPIRG

Clean Power Campaign

Coalition for Clean Air

Environment California

Natural Resources Defense Council

Sierra Club California

OPPOSITION: (Verified 8/19/16)

None received

ASSEMBLY FLOOR: 48-29, 5/12/16

AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gray, Grove, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Salas, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Burke, Hadley, Jones-Sawyer

Prepared by:

8/19/16 18:49:19

**** END ****

 THIRD READING  

Bill No: AB 1685

Author:

:

Vote:

SENATE ENVIRONMENTAL QUALITY COMMITTEE: 4-2, 6/8/16

AYES: Wieckowski, Hill, Leno, Pavley

NOES: Gaines, Bates

NO VOTE RECORDED: Jackson

SENATE TRANS. & HOUSING COMMITTEE: 7-4, 6/21/16

AYES: Beall, Allen, Leyva, McGuire, Mendoza, Roth, Wieckowski

NOES: Cannella, Bates, Gaines, Galgiani

SENATE JUDICIARY COMMITTEE: 5-2, 6/28/16

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Moorlach, Anderson

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 48-29, 5/12/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill increases from $500 to $37,500 the maximum civil penalty that may be imposed upon a person who violates specified provisions of California’s Vehicular Air Pollution Control statute, or any order, rule, or regulation of the California Air Resources Board adopted pursuant to those provisions. This bill provides that the Board shall adjust the maximum civil penalty for inflation based on the California Consumer Price Index. This bill provides certain exceptions to the increased maximum civil penalty, including violations involving portable fuel containers or small off-road engines, and provides that automobile dealers who violate specified provisions of the statute shall be subject to a civil penalty not to exceed $10,000. This bill adjusts from per vehicle to per violation the frequency for which certain penalties may be imposed.

ANALYSIS:

Existing law:

1. Requires that persons who violate any California Air Resources Board (ARB) order, rule, or regulation, where there is not a penalty described for the specific violation, shall be subject to a civil penalty not to exceed $500 per vehicle, portable fuel container, spout, engine, or other unit subject to regulation and that the penalty be collected by the State Treasurer and deposited into the Air Pollution Control Fund. (Health and Safety Code §43016)
2. Prohibits residents or businesses from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle or vehicle engine for use or resale in the state unless the engine has been certified compliant with ARB standards, as specified, with violations set at $5,000 per vehicle. (HSC §43151)
3. Prohibits new vehicles from being sold in California that do not meet the emissions standard adopted by ARB. (HSC §43211)
4. Provides penalties of $5,000 per action, for manufacturers who sell, attempt to sell, or offer for sale, a new vehicle that does not meet ARB emission standards. (HSC §43211)
5. Provides that manufacturers or distributors who do not comply with emission standards or test procedures adopted by ARB may be subject to civil penalties of $50 per vehicle that is not in compliance and that no further sales of the vehicles can take place until the penalty is paid. (HSC §43212)
6. Provides, pursuant to federal law, that violators be subject to civil penalties up to $37,500 per non-compliant vehicle or engine, $3,750 per tampering event or sale of defeat device, and $37,500 per day for reporting and recordkeeping violations. (42 U.S. Code §7524; 69(30) Federal Register 7121 [Feb. 13, 2004]; 73(239) Federal Register §75340 [Dec. 11, 2008]; 78(215) Federal Register §66643 [Nov. 6, 2013])

This bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $50 per vehicle, or $500 or $5,000 per action, depending on the provision, to a maximum of $37,500 per vehicle or action, as specified.
2. Authorizes, for violations committed by a manufacturer or distributor, that payment of penalties may be a condition for further sales by the manufacturer or distributor in the state of vehicle models that are alleged or found to be in violation by the state board.
3. Specifies that violations involving portable fuel containers or small off-road engines retain maximum civil penalties of $500 per unit.
4. Expands prohibitions for commerce in new motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state.
5. Increases from $5,000 to $37,500, per violation, the penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet applicable emissions standards.
6. Authorizes ARB to order a manufacturer to bring its vehicles into compliance with the emissions configuration they were certified to meet, and specifies that compliance with this order may be a condition of further sale of motor vehicles in California of vehicle models that are alleged or found to be in violation by the state board.
7. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.
8. Makes related clarifying amendments.

Background

1. Federal and state air quality laws. The federal Clean Air Act and its implementing regulations are intended to protect public health and environmental quality by limiting and reducing pollution from various sources. Under the Clean Air Act, the United States Environmental Protection Agency (US EPA) establishes National Ambient Air Quality Standards (NAAQS) that apply to outdoor air throughout the country. These federal standards exist for several air pollutants due to their negative impact on public health when above specified thresholds, including ozone, particulate matter (PM), nitrogen oxides (NOx), sulfur oxides, carbon monoxide, and lead. US EPA reviews each NAAQS at five-year intervals to ensure that the standards are based on the most recent scientific information.

Regions that do not meet the national standards for any one of the standards are designated nonattainment areas. The Clean Air Act sets deadlines for attainment based on the severity of nonattainment and requires states to develop comprehensive plans, known as the state implementation plan, to attain and maintain air-quality standards for each area designated nonattainment for an NAAQS.

California has some of the most severe air pollution problems in the country. In particular, the South Coast and San Joaquin air basins, which contain over half of the state’s population, are extreme nonattainment regions (the highest degree of severity) for ozone pollution and are both nonattainment regions for PM.

1. Why transportation emissions standards matter. Nationally and statewide, the transportation sector is responsible for a major fraction of air pollution, especially NOx (including NO and NO₂), which contributes to both ozone and PM formation. People who live and work in closer proximity to roadways are especially exposed to and impacted by this pollution. Nationwide, approximately 16% of U.S. housing units (including 48 million people) are located within 300 feet of a major highway, railroad, or airport, and the affected population is disproportionately economically disadvantaged and non-white.

Ground-level ozone (or tropospheric ozone) is a primary component of smog and is formed from the reaction of NOx with volatile organic compounds in sunlight. Ozone has a number of negative health effects including irritated respiratory system, reduced lung function, aggravated asthma, and inflammation and damage of the lining of the lungs. Active children are at highest risk from ozone exposure.

PM can be directly emitted or can be formed in the atmosphere when gaseous pollutants such as sulfur dioxide and NOx react to form fine particles. Very fine particulate matter is particularly dangerous since it burrows deep into the lungs where it can enter the bloodstream and harm the heart and other organs. Fine particulate pollution poses an especially critical health danger for children, the elderly, and people with existing health problems. Exposure to PM 2.5 (i.e., particles or droplets that are 2.5 µm or less in diameter) is also linked to cardiovascular disease. A 2010 ARB analysis based on scientific assessments by US EPA reported that approximately 9,000 people in California are estimated to die prematurely each year as a result of exposure to fine particle pollution.

In addition, the specialized cancer agency of the World Health Organization, the International Agency for Research on Cancer, classified outdoor air pollution, and PM as a major component of outdoor air pollution, as carcinogenic to humans.

1. US EPA and ARB vehicle testing requirements. To address transportation sector emissions, the federal Clean Air Act authorizes the US EPA to establish and regulate standards for hydrocarbons, carbon monoxide, NOx, and PM from mobile sources of pollution. Because of its pre-existing vehicle-emission standards and motor vehicle air pollution problems, California is also authorized under the Clean Air Act to implement separate stricter state mobile emission standards. State law assigns ARB with primary responsibility for control of mobile-source air pollution. Both US EPA and ARB regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain federal and state emissions standards. In particular, manufacturers must demonstrate that its vehicle’s exhaust and emission-control systems are durable and comply with the emission standards for the vehicle’s useful life. Only after going through this “certification of conformity” (COC) process are vehicles legal for sale. Manufacturers that fail to comply are subject to civil penalties and other enforcement actions. The current maximum federal penalty for violating the Clean Air Act through the sale of new vehicles without a valid COC is $37,500 per violation.

In California, applications for certification must be concurrently submitted to and approved by both the ARB and US EPA. By obtaining and testing a limited sample of vehicles from a test group or engine family, and attempting to duplicate the manufacturers’ vehicle emissions certification tests, ARB’s In-Use Compliance Program aims to ensure that manufacturers’ vehicles meet emissions standards throughout their useful lives.

1. The Volkswagen case and its lessons. As described in the background paper of the Joint Oversight Hearing by the Senate Transportation and Housing and Environmental Quality Committees (Volkswagen’s “Defeat Device:” Update and Implications for California, March 8, 2016), a 2014 study by academic researchers, followed by an expanded 2015 investigation by ARB and US EPA of discrepancies between emissions during stationary tests and while driving, led to admission by Volkswagen that several of their “clean diesel” engines had been designed with software-based “defeat devices” to bypass key elements of the emissions control systems. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/8/16)

American Lung Association in California

Bay Area Air Quality Management District

Breathe California

California Air Pollution Control Officers Association

CALPIRG

Clean Power Campaign

Coalition for Clean Air

Environment California

Natural Resources Defense Council

Sierra Club California

OPPOSITION: (Verified 8/8/16)

Alliance of Automobile Manufacturers

Global Automakers

ARGUMENTS IN SUPPORT: According to the author, “AB 1685 makes long overdue and common sense adjustments to California’s mobile source violation penalty amounts – bringing them into equivalence with federal law, ensuring compliance with the state’s strict clean air and emissions standards, protecting competitors that abide by the rules, and safeguarding public health and safety.”

ARGUMENTS IN OPPOSITION: Two trade organizations representing domestic and foreign manufacturers of automobiles have raised several concerns over the size of the increased maximum civil penalty and how ARB will assess these penalties.

The Alliance of Automobile Manufacturers (Alliance) states that increasing the current penalties by up to 750 times is excessive and is not accompanied by any requirement for ARB to update their civil penalty policy to clearly articulate how the increased penalties would be calculated. They state that if penalties are to be increased, that policy must be revised to provide quantifiable standards for the calculation of penalties so as to ensure consistency, transparency, and due process. Some per vehicle penalties change to per violation penalties, which raises the possibility of multiple penalties per vehicle. In addition, according to the Alliance, requiring payment of a civil penalty as a condition of continued sale during an appeal unfairly requires up-front payment of amounts that could later be found excessive. Last, the increase in maximum civil penalties from $5,000 to $37,500 also applies to manufacturers who fail to produce a zero emission vehicle (ZEV) credit and could result in an unwarranted penalty of up to $150,000 per vehicle.

The Global Automakers have some overlapping concerns with the Alliance, including that the requirement to pay a civil penalty as a condition for the continued sale of motor vehicles by a manufacturer or distributor, even if the penalty amount is contested and is under review by an appellate body, is overly punitive. In addition, because the sale of a target percentage of ZEVs is not a tailpipe emissions standard per se, and compliance with ZEV targets relies on factors outside manufacturers’ control, they should not be subject to such punitive penalties for failing to sell the requisite number of ZEVs in the state.

ASSEMBLY FLOOR: 48-29, 5/12/16

AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Roger Hernández, Holden, Irwin, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Gray, Grove, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Salas, Steinorth, Wagner, Waldron, Wilk

NO VOTE RECORDED: Burke, Hadley, Jones-Sawyer

Prepared by:

8/10/16 15:53:10

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: AB 1685 (Author:Gomez)

Version: June 14, 2016

Hearing Date: June 28, 2016

Fiscal: Yes

Urgency: No

Consultant: TH

SUBJECT

Vehicular Air Pollution: Civil Penalties

DESCRIPTION

This bill increases from $500 to $37,500 the maximum civil penalty that may be imposed upon a person who violates specified provisions of California’s Vehicular Air Pollution Control statute, or any order, rule, or regulation of the California Air Resources Board adopted pursuant to those provisions. This bill provides that the Board shall adjust the maximum civil penalty for inflation based on the California Consumer Price Index. This bill provides certain exceptions to the increased maximum civil penalty, including violations involving portable fuel containers or small off-road engines, and provides that automobile dealers who violate specified provisions of the statute shall be subject to a civil penalty not to exceed $10,000. This bill adjusts from per vehicle to per violation the frequency for which certain penalties may be imposed.

BACKGROUND

On September 3, 2015, representatives of the automaker Volkswagen (VW) admitted to the U.S. Environmental Protection Agency (U.S. EPA) and the California Air Resources Board (CARB) that a large number of their diesel-powered vehicle engines had been manufactured with a device designed to bypass or defeat elements of the vehicle’s on-board emissions control system. According to the British Broadcasting Company:

[these] engines had computer software that could sense [emissions] test scenarios by monitoring speed, engine operation, air pressure and even the position of the steering wheel. When the cars were operating under controlled laboratory conditions - which typically involve putting them on a stationary test rig - the device appears to have put the vehicle into a sort of safety mode in which the engine ran below normal power and performance. Once on the road, the engines switched out of this test mode . . . and emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US. (Russell Hotten, Volkswagen: The Scandal Explained, BBC (December 10, 2015) <http://www.bbc.com/news/business-34324772> [as of June 23, 2016].)

Indications of a problem with VW’s diesel fleet began surfacing at least a year earlier when in 2014, “regulators raised concerns about VW emissions levels, but these were dismissed by the company as technical issues and unexpected real-world conditions.” (Id.) However, once regulators uncovered the true cause of these emissions irregularities, they determined that “482,000 cars in the US only, including the VW-manufactured Audi A3, and the VW models Jetta, Beetle, Golf and Passat” were equipped with the device.” VW has since “admitted that about 11 million cars worldwide, including eight million in Europe, are fitted with the so-called defeat device,” prompting regulators in the UK, Italy, France, South Korea, Canada and, Germany, to open investigations. (Id.) CARB is also now investigating other manufacturers’ testing results to see if this problem extends beyond VW.

The financial cost to VW has been significant. With the company recalling millions of cars worldwide, “it has set aside €6.7bn (£4.8bn) to cover costs” resulting in the company “posting its first quarterly loss for 15 years of €2.5bn in late October” of last year. However, the costs to VW are likely to escalate given that the “EPA has the power to fine a company up to $37,500 for each vehicle that breaches standards - a maximum fine of about $18bn.” (Id.)

Under existing law, CARB can impose a civil penalty of $500 per vehicle against an automaker who violates the Board’s emissions standards. This bill would increase that civil penalty amount to $37,500 per violation.

CHANGES TO EXISTING LAW

Existing federal law, the Clean Air Act, authorizes the imposition of civil penalties against any person who violates specified provisions pertaining to motor vehicle emission and fuel standards in the amount of $25,000 (now $37,500), as specified. (42 U.S.C. Sec. 7524.)

Existing law provides that any person who violates any provision of California’s Vehicular Air Pollution Control statute, or any order, rule, or regulation of the California Air Resources Board (state board) adopted pursuant to the statute, and for which violation there is not provided in this part any other specific civil penalty or fine, shall be subject to a civil penalty not to exceed $500 per vehicle, portable fuel container, spout, engine, or other unit subject to regulation. (Health & Saf. Code Sec. 43016.)

Existing law provides that any person who engages in specified prohibited transactions shall be liable for a civil penalty not to exceed $5,000 per vehicle. (Health & Saf. Code Sec. 43154.)

Existing law provides that no new motor vehicle shall be sold in California that does not meet the emission standards adopted by the state board, and any manufacturer who sells, attempts to sell, or causes to be offered for sale a new motor vehicle that fails to meet the applicable emission standards shall be subject to a civil penalty of $5,000 for each such action. (Health & Saf. Code Sec. 43211.)

Existing law provides that any manufacturer or distributor who does not comply with the emission standards or the test procedures adopted by the state board shall be subject to a civil penalty of $50 for each vehicle which does not comply with the standards or procedures and which is first sold in this state. The payment of such penalties to the state board shall be a condition to the further sale by such manufacturer or distributor of motor vehicles in this state. (Health & Saf. Code Sec. 43212.)

This bill would increase the above civil penalty amounts to $37,500 for each action in violation, except as specified.

This bill would specify that violations involving portable fuel containers or small off-road engines shall be subject to a civil penalty not to exceed $500 per unit.

This bill would specify that a dealer who engages in specified prohibited transactions shall be subject to a civil penalty not to exceed $10,000 for each such action.

This bill would direct the state board to adjust the above civil penalty amounts for inflation based on the California Consumer Price Index.

This bill would provide that for a manufacturer or distributor, the payment of the penalty shall be a condition for the continued sale in this state of products regulated by the state board.

This bill would provide that the state board may order a manufacturer of motor vehicles to bring its vehicles into compliance with the emissions configuration to which they were certified, and that compliance with the order shall be a condition for the continued sale of motor vehicles by that manufacturer in this state.

COMMENT

1. Stated need for the bill

The author writes:

By law, California’s mobile source civil penalty amounts must be set at levels that ensure compliance with the law and deter future violations. To be effective, penalty levels cannot simply be the cost of doing business. In the 1970s, the average new car cost around $3,500. Today, the average is around $33,500, with some models costing tens of thousands of dollars more. However, the maximum penalty for actions involving the sale of new motor vehicles that do not meet the state’s emission standards or test procedures has remained flat for decades, at a woefully inadequate $5,000 per vehicle. By contrast, the federal maximum penalty amount for analogous violations is $37,500. Moreover, U.S. EPA is required to review penalty amounts every four years and adjust them for inflation.

AB 1685 seeks to remedy this discrepancy and strengthen California’s ability to deter bad actors that violate the state’s strict emissions standards as well as protect public health and the environment. Specifically, AB 1685:

• increases the maximum penalty for mobile source violations to $37,500 (equal to the penalty prescribed in federal law), while retaining the current, lower penalty amount for smaller, less expensive equipment, like small off-road engines;
• prohibits further sales until the penalty is paid, consistent with other provisions of existing law;
• modernizes the code to reflect that today’s new vehicles may be advertised or sold over the internet, rather than at a brick-and-mortar establishment exclusively;
• allows ARB [California Air Resources Board] to order manufacturers to bring their vehicles into the emissions configuration of the ARB certification, and requires compliance with the order before a manufacturer may continue selling vehicles in California; and
• allows ARB to update its vehicular penalties periodically for inflation, and exempts this adjustment from the Administrative Procedures Act, so that penalties maintain their deterrent effect over time.

1. Disincentivizing noncompliance

This bill would raise the maximum civil penalties that the California Air Resources Board (CARB) could impose on parties who violate standards established under California’s Vehicular Air Pollution Control statute. The civil penalties currently authorized in law – generally either $500 or $5,000 per noncompliant vehicle – were set by the Legislature in 1975. Having not been adjusted since that time, California’s civil penalty level is now up to 1/75th the amount that may be imposed for similar violations under the federal Clean Air Act, and does not carry the same force to disincentivize parties from engaging in non-compliant acts. This bill raises the maximum civil penalty that may be assessed under state law to match its federal counterpart. Writing in support, the American Lung Association in California states:

This bill would strengthen California’s ability to protect public health by updating the penalties as a deterrent for air pollution violations such as those recently perpetrated by Volkswagen. Largely due to transportation pollution, California is home to the nation’s most polluted cities. Disadvantaged communities throughout California bear a disproportionate burden of air pollution and other environmental burdens made worse by traffic pollution. AB 1685 would update the decades-old penalty structure for violating emissions programs as an important deterrent to cheating on California’s emissions standards and certification tests.

AB 1685 would update the maximum fines able to be imposed on emission violations to align with the federal penalty level of $37,500 per vehicle. This would raise the fine up from the current $5,000 maximum per vehicle that was established decades ago and reflected a much lower overall vehicle purchase price. AB 1685 also provides for the maximum fine to be adjusted over time based on inflation, ensuring a more reasonable penalty amount remains in place going forward. Updating the emissions penalties is long overdue and has been clearly highlighted as insufficient in light of the Volkswagen emissions cheating scandal.

1. Opposition concerns

Domestic and foreign manufacturers of automobiles, speaking through their representative trade organizations, have raised several concerns over how the California Air Resources Board will assess these enlarged civil penalties. The Alliance of Automobile Manufacturers (Alliance) summarizes these concerns as follows:

• increasing the penalty for failing to produce a zero emission vehicle credit (ZEV) from $5,000 to $37,500 results in an unconscionable penalty of up to $150,000 per vehicle. Such a dramatic penalty increase for ZEV credits is unwarranted. (Section 43211)

• increasing the current penalties by up to 750 times is excessive and is not accompanied by any requirement for the California Air Resources Board (CARB) to update their civil penalty policy to clearly articulate how the increased penalties are to be calculated. If penalties are to be increased, that policy must be revised to provide quantifiable standards for the calculation of penalties so as to ensure consistency, transparency, and due process.

• requiring payment of a civil penalty as a condition of continued sale during an appeal unfairly requires up-front payment of amounts that could later be found excessive. (Sections 43016, 43154, 43212)

• requiring CARB to prohibit sales of an entire fleet of compliant vehicles when only a small subset cannot be brought into compliance is unwarranted and beyond the stated intent of the bill. (Section 43214)

• changing penalties from “per vehicle” to “per action” has an unclear effect and is concerning to the extent it may be construed to permit multiple penalties per vehicle, or broaden the scope of what actions are subject to penalty. (Section 43016, 43154)

Along with the Alliance, manufacturers represented by Global Automakers argue that the requirement to pay a civil penalty, even if the penalty amount is contested and is under review by an appellate body, as a condition for the continued sale of motor vehicles by a manufacturer or distributor is overly punitive. As stated by the Alliance, a manufacturer who is assessed a penalty for one non-compliant product line would potentially be prohibited from selling any other motor vehicles, even in compliant product lines, unless they first paid the assessed penalty to the ARB. The Committee may wish to consider the extent to which compliant product lines offered by a manufacturer or distributor ought to be impacted by disputes over penalties concerning non-compliant product lines, and whether parties ought to be given an opportunity to request the stay of a penalty assessment while appealing that assessment, which is typically available (though not necessarily granted) to litigants appealing a judgment in civil litigation.

Support: American Lung Association in California; Bay Area Air Quality Management District; Breathe California; CALPIRG; California Air Pollution Control Officers Association; Clean Power Campaign; Coalition for Clean Air; Environment California; Natural Resources Defense Council; Sierra Club California

Opposition: Alliance of Automobile Manufacturers; Global Automakers

HISTORY

Source: Author

Related Pending Legislation: None Known

Prior Legislation: AB 2922 (DeSaulnier, Ch. 687, Stats. 2008) specified that violations of California Air Resources Board rules or regulations that are subject to a $500 penalty include those relating to portable fuel containers, spouts, engines, and other units subject to regulation under the Board’s authority to control vehicular air pollution.

Prior Vote:

Senate Transportation and Housing Committee (Ayes 7, Noes 4)

Senate Environmental Quality Committee (Ayes 4, Noes 2)

Assembly Floor (Ayes 48, Noes 29)

Assembly Appropriations Committee (Ayes 14, Noes 6)

Assembly Transportation Committee (Ayes 10, Noes 5)

**************

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: Hearing Date: 6/21/2016

SUBJECT:

DIGEST: This bill increases and clarifies the civil penalties for certain emissions violations by vehicle and engine manufacturers and distributors.

ANALYSIS:

Existing law:

1. Establishes a civil penalty of up to $500 per vehicle, portable fuel container (e.g., gas can), spout, engine, or other unit for a violation of statute, or a violation of any order, rule, or regulation adopted by the state Air Resources Board (ARB) pursuant to statute, for which there is no specific civil penalty or fine.
2. Prohibits the import, delivery, purchase, rent, lease, acquisition, or receipt of a new motor vehicle, new engine, or motor vehicle with a new engine, for use, registration, or resale in California unless the vehicle or engine has been certified by ARB, with certain limited exceptions. Provides that a person in violation of this provision shall be liable for a civil penalty of up to $5,000 per vehicle.
3. Prohibits the sale of any new motor vehicle in California that does not meet ARB emission standards. Provides that any manufacturer that violates this provision shall be subject to a civil penalty of $5,000 per action.
4. Provides that any manufacturer or distributor not in compliance with ARB emission standards or test procedures shall be subject to a civil penalty of $50 for each vehicle that is out of compliance and is first sold in this state. Prohibits the manufacturer or distributor from selling more vehicles until the penalties are paid.

This bill:

1. Establishes a civil penalty of $37,500 per action for a violation of any statute, or any order, rule, or regulation adopted by ARB pursuant to statute, for which there is no specific civil penalty or fine. Maintains the civil penalty of up to $500 per unit for violations involving portable fuel containers or small off-road engines. Requires a manufacturer or distributor who is in violation to pay the penalty or penalties as a condition of continued sale in California. Requires ARB to adjust the penalty for inflation based on the California Consumer Price Index.
2. Increases, from $5,000 per vehicle to $37,500 per action, the violation for the import, delivery, purchase, rent, lease, acquisition, or receipt of a new vehicle, new engine, or vehicle with a new engine that has not been certified by ARB. Specifies that for dealers, the civil penalty shall increase to $10,000 per action. Requires ARB to adjust the penalty for inflation based on the California Consumer Price Index. Adds “introduction into commerce” to the list of violations. Replaces “a person who is a resident of, or who operates an established place of business within, this state” with “a person.”
3. Increases the civil penalty from $5,000 per action to $37,500 per action for selling a new motor vehicle in California that does not meet ARB emission standards. Requires ARB to adjust the penalties for inflation based on the California Consumer Price Index.
4. Increases the penalty from $50 per vehicle to a maximum of $37,500 per vehicle for failure to comply with ARB emissions standards or test procedures. Requires ARB to adjust the penalty for inflation based on the California Consumer Price Index.
5. Authorizes ARB to order a manufacturer to bring its vehicles into compliance with the emissions configuration they were certified to meet. Requires a manufacturer to comply with this order as a condition for continued sales in California.

COMMENTS:

1. Purpose. The author states that Volkswagen’s egregious actions (see “Background on the Volkswagen Scandal” below) not only violated public trust, but have had deleterious effects on human health and the environment. Although new car prices have increased tens of thousands of dollars since the 1970s, California’s civil penalties relating to emissions standards have remained flat for decades at $5,000 per vehicle. The author states that in order to be effective, penalty levels cannot simply be the cost of doing business. The federal maximum penalty amount for analogous violations is $37,500; moreover, the federal Environmental Protection Agency (U.S. EPA) is required to review penalty amounts every four years and adjust them for inflation. This bill seeks to strengthen California’s ability to deter bad actors that violate the state’s strict emissions standards, and to protect public health and the environment.
2. Federal and state emissions testing requirements. Nationally and statewide, the transportation sector is responsible for a major portion of air pollution. To address transportation sector emissions, the federal Clean Air Act authorizes U.S. EPA to establish and regulate standards for mobile sources of pollution. Because of its pre-existing vehicle emissions standards and motor vehicle air pollution problems, California is also authorized under the Clean Air Act to implement separate stricter state mobile emission standards.

Both U.S. EPA and ARB regulations require a manufacturer, prior to introducing a vehicle for sale, to demonstrate that it meets certain federal and state emissions standards. Only after undergoing this certification process are vehicles legal for sale in California. In California, applications must be concurrently submitted to, and approved by, both U.S. EPA and ARB. A manufacturer that fails to comply is subject to civil penalties and other enforcement actions. The current maximum federal penalty is $37,500 per violation, while a violation of the state certification carries a fine of up to $5,000 per vehicle.

1. Background on the Volkswagen scandal. As early as 2013, regulators in California and the European Union noticed that emissions for Volkswagen diesel engines were higher than expected when the cars were tested in actual operating conditions. Clear evidence that the vehicles’ on-road emissions deviated from laboratory testing levels came in May 2014 in a study by university researchers working in cooperation with ARB. The study results prompted ARB and U.S. EPA to launch their own investigations. On September 3, 2015, representatives of Volkswagen admitted to staff of U.S. EPA and ARB that a large number of their vehicle engines had been designed and manufactured with a software-based “defeat device” to bypass, defeat, or render inoperative elements of the vehicles’ emissions control systems. As a result, these vehicles are able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, of which 79,400 are in California.
2. Legislative hearing. On March 8, 2016, this committee held a joint hearing with the Senate Environmental Quality Committee titled, “Volkswagen’s ‘Defeat Device:’ Update and Implications for California.” During the hearing, committee members expressed the need for stronger penalties to discourage non-compliance by automobile manufacturers, particularly given that the federal penalties are substantially higher and that the state’s penalties were set in 1970 and have not been indexed to inflation. Committee members suggested that existing ARB penalties do not provide a sufficient deterrent, particularly for egregious actions such as in the Volkswagen case. This bill seeks to address those concerns.
3. Fixing the “catchall” provision. Existing law contains a “catchall” provision establishing a $500 penalty for mobile source violations that do not carry a specific penalty elsewhere in statute. This provision is commonly applied to violations such as lawn equipment, where a $500 penalty may be appropriate. It also applies, however, to violations involving much more expensive pieces of equipment. This bill increases the maximum penalty to $37,500 for expensive equipment, consistent with federal law, but retains the $500 penalty for smaller, less expensive equipment such as small off-road engines.
4. Increasing penalties. This bill establishes penalties of up to $37,500 for specified violations, and increases the penalty for others from $5,000 per vehicle to $37,500 per action, in line with U.S. EPA penalties. While the increased amounts may sound high, the author notes that this bill does not require ARB to impose penalties of this amount, but up to this amount. In a report developed pursuant to SB 1402 of 2010 (see “Related Legislation” below), ARB noted that it takes into account the specific circumstances for each enforcement case when determining a penalty. ARB also noted that penalty determinations are designed specifically to prevent harm to the public and the environment and are tailored so as not to create undue financial hardship.
5. Accounting for Internet sales. In addition to updating the civil penalties for emissions violations, this bill makes various updates to statute. For example, this bill replaces “a person who is a resident of, or who operates an established place of business within, this state” with “a person,” and adds “introduction into commerce” to the prohibitions related to new vehicles and engines that are not certified by ARB. The author states that these modernizations address the fact that today’s new vehicles can be advertised or sold over the Internet rather than at a brick-and-mortar establishment.
6. Stakeholder concerns. Global Automakers has taken an “oppose unless amended” position. They raise a number of concerns, some of which the author has addressed in the June 14^th amendments, as indicated below. The Alliance of Automobile Manufacturers, which has taken an “oppose” position, raises similar concerns.
   1. This bill would result in a ban on advertising upcoming models, such as through auto shows or in teaser ads, if a manufacturer has committed a violation under this bill. The prior version of this bill added “advertise” and “introduce into commerce” to the list of violations related to engines that have not been certified by ARB. The new amendments address Global Automakers’ concern by removing “advertise” from this provision.
   2. This bill would require payment of civil penalties as a condition for continued sale of any vehicles in the state, even if the party wishes to avail itself of its right to appeal the order imposing the penalty. The author is working with stakeholders to address this issue.
   3. This bill’s change of the terminology from “per vehicle” to “per action” is unclear as it may permit multiple penalties per vehicle, or broaden the scope of what “actions” are subject to penalty. The author is working with stakeholders to address this issue.
   4. This bill would increase the penalties associated with the zer-emission vehicle (ZEV) mandate to $37,500; a manufacturer should not be subject to such punitive penalties for a failure to sell the requisite number of ZEVs in the state. The author is continuing to work with stakeholders on this issue.
   5. This bill imposes maximum penalties in several sections with no opportunity for reduction should circumstances warrant. The June 14^th amendments address this concern by amending the penalties in this bill to be “up to” the maximum amount, rather than the specific amount.
7. Triple-referral. This bill was approved by the Environmental Quality Committee on June 8 on a 4-2 vote. It will also be heard by the Judiciary Committee.

Related Legislation:

ACR 112 (Hadley) — commends ARB for its work uncovering the Volkswagen defeat devices and declares the Legislature’s support for the increased use of real-world emissions verification testing and enhanced penalty authority for ARB to deter future efforts to circumvent emissions standards. This bill is pending referral in the Senate Rules committee.

SB 1402 (Dutton, Chapter 413, Statutes of 2010) — requires ARB to provide a specified written explanation prior to imposing an administrative or civil penalty for a violation of air pollution law, make these explanations available to the public, annually report specified administrative penalties it has imposed, and publish a penalty policy in relation to vehicular air pollution control.

Assembly Votes:

Floor: 48-29

Appr: 14-6

Trans: 10-5

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 15, 2016.)

SUPPORT:

American Lung Association in California

Bay Area Air Quality Management District

Breathe California

California Air Pollution Control Officers Association

California Railroad Industry

CALPIRG

Clean Power Campaign

Coalition for Clean Air

Environment California

Natural Resources Defense Council

Sierra Club California

OPPOSITION:

Alliance of Automobile Manufacturers

Global Automakers

-- END --

SENATE COMMITTEE ON ENVIRONMENTAL QUALITY

Senator Wieckowski, Chair

2015 - 2016 Regular

Bill No: AB 1685

SUBJECT: Vehicular air pollution: civil penalties.

Existing law:

1. Requires that persons who violate any California Air Resources Board (ARB) order, rule, or regulation, where there is not a penalty described for the specific violation, shall be subject to a civil penalty not to exceed $500 per vehicle, portable fuel container, spout, engine, or other unit subject to regulation and that the penalty be collected by the State Treasurer and deposited into the Air Pollution Control Fund. (Health and Safety Code §43016)
2. Prohibits residents or businesses from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle or vehicle engine for use or resale in the state unless the engine has been certified compliant with ARB standards, as specified, with violations set at $5,000 per vehicle. (HSC §43151)
3. Prohibits new vehicles from being sold in California that do not meet the emissions standard adopted by ARB. (HSC §43211)
4. Provides penalties of $5,000 per action, for manufacturers who sell, attempt to sell, or offer for sale, a new vehicle that does not meet ARB emission standards. (HSC §43211)
5. Provides that manufacturers or distributors who do not comply with emission standards or test procedures adopted by ARB may be subject to civil penalties of $50 per vehicle that is not in compliance and that no further sales of the vehicles can take place until the penalty is paid. (HSC §43212)
6. Provides, pursuant to federal law, that violators be subject to civil penalties up to $37,500 per non-compliant vehicle or engine, $3,750 per tampering event or sale of defeat device, and $37,500 per day for reporting and recordkeeping violations. (42 U.S. Code §7524; 69(30) Federal Register 7121 [Feb. 13, 2004]; 73(239) Federal Register §75340 [Dec 11, 2008]; 78(215) Federal Register §66643 [Nov. 6, 2013])

This bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $50 per vehicle, or $500 or $5,000 per action, depending on the provision, to a maximum of $37,500 per vehicle or action, as specified.
2. Requires, for violations committed by a manufacturer or distributor, that payment of penalties be a condition for further sales by the manufacturer or distributor in the state.
3. Specifies that violations involving portable fuel containers or small off-road engines retain maximum civil penalties of $500 per unit.
4. Expands prohibitions for commerce in new motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state.
5. Increases from $5,000 to $37,500, per action, the penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet applicable emissions standards.
6. Authorizes ARB to order a manufacturer to bring its vehicles into compliance with the emissions configuration they were certified to meet, and requires that compliance with this order shall be a condition of further sale of motor vehicles in California.
7. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.
8. Makes related clarifying amendments.

Background

1. Federal and state air quality laws. The federal Clean Air Act and its implementing regulations are intended to protect public health and environmental quality by limiting and reducing pollution from various sources. Under the Clean Air Act, the United States Environmental Protection Agency (US EPA) establishes National Ambient Air Quality Standards (NAAQS) that apply to outdoor air throughout the country. These federal standards exist for several air pollutants due to their negative impact on public health when above specified thresholds, including ozone, particulate matter (PM), nitrogen oxides (NOx), sulfur oxides (SOx), carbon monoxide, and lead. US EPA reviews each NAAQS at five-year intervals to ensure that the standards are based on the most recent scientific information.

Regions that do not meet the national standards for any one of the standards are designated nonattainment areas. The Clean Air Act sets deadlines for attainment based on the severity of nonattainment and requires states to develop comprehensive plans, known as the state implementation plan (SIP), to attain and maintain air-quality standards for each area designated nonattainment for an NAAQS.

California has some of the most severe air pollution problems in the country. In particular, the South Coast and San Joaquin air basins, which contain over half of the state’s population, are extreme nonattainment regions (the highest degree of severity) for ozone pollution and are both nonattainment regions for PM.

1. Why transportation emissions standards matter. Nationally and statewide, the transportation sector is responsible for a major fraction of air pollution, especially NOx (including NO and NO₂), which contributes to both ozone and PM formation. People who live and work in closer proximity to roadways are especially exposed to and impacted by this pollution. Nationwide, approximately 16% of US housing units (including 48 million people) are located within 300 ft. of a major highway, railroad, or airport, and the affected population is disproportionately economically disadvantaged and non-white.

Ground-level ozone (or tropospheric ozone) is a primary component of smog and is formed from the reaction of NOx with volatile organic compounds in sunlight. Ozone has a number of negative health effects including irritated respiratory system, reduced lung function, aggravated asthma, and inflammation and damage of the lining of the lungs. Active children are at highest risk from ozone exposure.

PM can be directly emitted or can be formed in the atmosphere when gaseous pollutants such as sulfur dioxide and NOx react to form fine particles. Very fine particulate matter is particularly dangerous since it burrows deep into the lungs where it can enter the bloodstream and harm the heart and other organs. Fine particulate pollution poses an especially critical health danger for children, the elderly, and people with existing health problems. Exposure to PM 2.5 (i.e., particles or droplets that are 2.5 µm or less in diameter) is also linked to cardiovascular disease. A 2010 ARB analysis based on scientific assessments by US EPA reported that approximately 9,000 people in California are estimated to die prematurely each year as a result of exposure to fine particle pollution.

In addition, the specialized cancer agency of the World Health Organization, the International Agency for Research on Cancer, classified outdoor air pollution, and PM as a major component of outdoor air pollution, as carcinogenic to humans.

1. US EPA and ARB vehicle testing requirements. To address transportation sector emissions, the federal Clean Air Act authorizes the US EPA to establish and regulate standards for hydrocarbons, carbon monoxide, NOx, and PM from mobile sources of pollution. Because of its pre-existing vehicle-emission standards and motor vehicle air pollution problems, California is also authorized under the Clean Air Act to implement separate stricter state mobile emission standards. State law assigns ARB with primary responsibility for control of mobile-source air pollution. Both US EPA and ARB regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain federal and state emissions standards. In particular, manufacturers must demonstrate that its vehicle’s exhaust and emission-control systems are durable and comply with the emission standards for the vehicle’s useful life. Only after going through this “certification of conformity” (COC) process are vehicles legal for sale. Manufacturers that fail to comply are subject to civil penalties and other enforcement actions. The current maximum federal penalty for violating the Clean Air Act through the sale of new vehicles without a valid COC is $37,500 per violation.

In California, applications for certification must be concurrently submitted to and approved by both the ARB and US EPA. By obtaining and testing a limited sample of vehicles from a test group or engine family, and attempting to duplicate the manufacturers’ vehicle emissions certification tests, ARB’s In-Use Compliance Program aims to ensure that manufacturers’ vehicles meet emissions standards throughout their useful lives.

1. The Volkswagen case and its lessons. As described in the background paper of the Joint Oversight Hearing by the Senate Transportation and Housing and Environmental Quality Committees (Volkswagen’s “Defeat Device:” Update and Implications for California, March 8, 2016), a 2014 study by academic researchers, followed by an expanded 2015 investigation by ARB and US EPA of discrepancies between emissions during stationary tests and while driving, led to admission by Volkswagen (VW) that several of their “clean diesel” engines had been designed with software-based “defeat devices” to bypass key elements of the emissions control systems. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

During the hearing, Members of the Senate Committees expressed the need for stronger penalties to discourage non-compliance by automobile manufacturers, particularly given that federal penalties are substantially higher and that penalties for non-compliance in California were set in the 1970 and have not been indexed to inflation. Members suggested that existing ARB penalties do not provide sufficient deterrent, particularly for egregious actions to circumvent emissions requirements, such as with VW.

Comments

1. Purpose of bill. According to the author, “AB 1685 makes long overdue and common sense adjustments to California’s mobile source violation penalty amounts – bringing them into equivalence with federal law, ensuring compliance with the state’s strict clean air and emissions standards, protecting competitors that abide by the rules, and safeguarding public health and safety.”
2. Updating potential penalties while maintaining flexibility. By raising the maximum penalties, but still allowing ARB discretion on actual penalty amounts up to those maxima, ARB staff expects that there will be a greater deterrence effect for potential violators, as well as real punitive impacts on actual bad actors who knowingly violate emissions standards in the way that VW did. AB 1685 also allows for ARB to periodically update mobile source penalties by indexing them to inflation, thereby ensuring that penalties maintain their deterrent effect over time.

Because there have been no increases in specified penalties since they were first created more than four decades ago, AB 1685’s proposed adjustment to match the federal, inflation-adjusted maximum levels may strike some stakeholders as too dramatic of an increase. In practice, however, ARB’s actual penalties are calculated based on multiple statutory factors, including the violator’s ability to pay. Moreover, lower penalty amounts are explicitly retained for smaller, less egregious violations and violations involving lower-value equipment such as off-road engines and fuel containers.

1. Further statute modernization. By removing language about place of business and residency, AB 1685 modernizes the state code to allow ARB to assess penalties for violations of its regulations by internet-based entities doing commerce in new cars destined for California.
2. Statutory overlap and ambiguity? Existing statute arguably includes some ambiguity in the interpretation of potentially overlapping violations with different maximum penalties. AB 1685 may exacerbate this ambiguity by increasing the differences in penalties, and thereby incentivizing bad actors to legally challenge which penalties apply to them. Specifically, AB 1685 will update the maximum penalty to $37,500 within HSC §43016(a)(1), which is interpreted as a “catch-all” section, for any relevant violations that do not otherwise have explicit penalties in Part 5 (HSC §43000 et seq.).

Elsewhere in Part 5, however, HSC §43008.6 authorizes a maximum of $1,500 per violation of Vehicle Code (VEH) §27156, which arguably covers similar emissions control system violations as found in HSC §43000 et seq. For example, according to VEH §27156(b), “… No person shall disconnect, modify, or alter any such required device,” and according to VEH §27156(c), “No person shall install, sell, offer for sale, or advertise any device, apparatus, or mechanism intended for use with, or as a part of, a required motor vehicle pollution control device or system that alters or modifies the original design or performance of the motor vehicle pollution control device or system.”

Any substantial overlap in violations therefore risks that bad actors may have incentive to argue that HSC §43008.6, with its much lower maximum penalties, applies to them rather than the revised sections of HSC §43000 et seq. with its new maximum penalties of $37,500, pursuant to AB 1685. To the extent that such reductions of maximum penalties can be pursued and possibly litigated, the goals of AB 1685 and ARB to increase emissions compliance and substantively penalize bad actors may be short-circuited.

Although the relevant Health and Safety Code sections are conventionally interpreted to apply mainly to manufacturers and distributors of vehicles, and the Vehicle Code section appears to otherwise apply mostly to vehicle operators, these targets are not explicitly specified within all the highlighted sections above, contributing to possible ambiguity of interpretation and applicability. As this bill continues to move, the author or other Committees may wish to further explore this issue to resolve whether it would be precautionary and advantageous to reduce such ambiguities.

TRIPLE REFERRAL:

If this measure is approved by the Senate Environmental Quality Committee, the do pass motion must include the action to re-refer the bill to the Senate Transportation and Housing Committee.

Related/Prior Legislation

ACR 112 (Hadley) thanks ARB for its exemplary work and tenacity in uncovering emissions control defeat devices on certain diesel-fueled VW motor vehicles. ACR 112 was amended and passed out of the Assembly Committee on Natural Resources (7-0) and is currently awaiting a vote on the Assembly Floor.

SB 1402 (Dutton, Chapter 413, Statutes of 2010) requires ARB to provide a specified written explanation prior to imposing an administrative or civil penalty for a violation of air pollution law, make these explanations available to the public, annually report specified administrative penalties imposed, and publish a penalty policy pertaining to vehicular air pollution control.

AB 1085 (Mendoza, Chapter 384, Statutes of 2009) requires ARB to release all technical data that is used to develop regulations prior to the comment period of any proposed regulation.

SOURCE:

Assembly Member Gomez

SUPPORT:

American Lung Association, California

Bay Area Air Quality Management District

Breathe California

California Air Pollution Control Officers Association (CAPCOA)

CALPIRG

Clean Power Campaign

Coalition for Clean Air

Environment California

Natural Resources Defense Council

Sierra Club California

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1685

Author:(Gomez)

As Amended Ver:April 11, 2016

Majority vote

SUMMARY: Updates civil penalties for violations of California Air Resources Board (ARB) regulations, orders, or rules, to bring penalty assessments into alignment with those of the United States Environmental Protection Agency (U.S. EPA). Specifically, this bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $500 to a maximum of $37,500 per action and requires, for violations committed by a manufacturer or distributor, that payment of penalties be a condition for further sales by the manufacturer or distributor.
2. Provides that violations involving portable fuel containers or small off-road engines remain subject to civil penalties of $500 per unit.
3. Expands penalties for selling motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state and includes activities such as advertising and introducing commerce into the state.
4. Deletes provisions defining an established place of business as a place actually occupied either continuously or at regular periods in order to include internet-based businesses.
5. Expands penalties from a maximum of $5,000 to $37,000 per action for violations of ARB regulations committed by a manufacturer or distributor and requires that payment of penalties be a condition to further motor vehicle sales by the manufacture or distributor in California.
6. Increases from $5,000 to $37,500, per action, the penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet applicable emissions standards.
7. Authorizes ARB to order a manufacturer to bring its vehicles into emissions configuration to which they were certified and compliance with this requirement be a condition of further sale of motor vehicles in California.
8. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.

FISCAL EFFECT: According to the Assembly Appropriations Committee, unknown additional penalty revenue, which would be deposited into the Air Pollution Control Fund.

COMMENTS: Both nationally and statewide, the transportation sector is known to be a major contributor of criteria pollutants and climate change emissions. To address transportation sector emissions, both ARB and U.S. EPA regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain emissions standards. In California, manufacturers must additionally demonstrate compliance with state air-quality standards and manufacturers who fail to comply are subject to civil penalties and other enforcement actions.

To be certified by ARB, a vehicle must demonstrate that its exhaust and emission-control systems are durable and comply with the emission standards for the vehicle's useful life. In California, an application for certification must be submitted to, and approved by, both the ARB and U.S. EPA concurrently.

On September 3, 2015, representatives of Volkswagen (VW) admitted to the U.S. EPA and ARB that a large number of their vehicle engines had been designed and manufactured with a "defeat device" designated to bypass, or render inoperative, elements of the vehicles' emissions control system. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

In a joint hearing entitled Volkswagen's "Defeat Device:" Update and Implications for California held by the Senate Transportation and Housing and Environmental Quality Committees on Tuesday March 8, 2016, the Legislature was updated with regard to how the defeat device was discovered, VW's admissions, ARB and U.S. EPA's actions, the status of federal litigation, and the overall effect of the issue on California's air quality, among other things. In the background paper for the hearing, the Committees encouraged the Legislature to consider creating stronger penalties to discourage non-compliance by automobile manufacturers. It was pointed out federal penalties are substantially higher that state penalties for non-compliance and that the penalties were set in the 1970 and are not indexed to inflation. The Committees suggested that existing ARB penalties do not provide sufficient deterrent, particularly for egregious actions to circumvent emissions requirements, such as in case of VW.

To ensure that California's air quality laws and regulations are followed, and to better align fines with federal penalties, the author has introduced this bill which would increase the maximum penalties for mobile source violations. By increasing ARB's fines, the author believes that overall compliance will be improved. Specifically, this bill would increase the maximum penalty for mobile source violations from $500 to $37,500, while retaining the current lower penalty amount for smaller, less egregious, violations and violations for lower-value equipment such as off-road engines and fuel containers. Additionally, this bill would modernize statutes to allow penalties to be extended to manufacturers outside of the state to better reflect modern business practices whereby vehicles are advertised and sold over the internet (from locations outside of California). Lastly, this bill would allow ARB to periodically update mobile source penalties by indexing them to inflation thereby ensuring that penalties maintain their deterrent effect over time.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093 FN: 0002875

Date of Hearing: May 4, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1685

Author:(Gomez) – As Amended Ver:April 11, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill increases maximum civil penalties for violations of California Air Resources Board (ARB) regulations, orders, or rules, regarding vehicles emissions to bring penalty assessments into alignment with those of the United States Environmental Protection Agency (U.S. EPA). Specifically, this bill:

1. Increases the maximum civil penalty, from $500 to $37,000 per action for violations of certain air quality orders, rules, or regulations adopted by ARB.
2. Provides that violations involving portable fuel containers or small off-road engines remain subject to civil penalties of up to $500 per.
3. Authorizes ARB to adjust the above maximum penalties based on the California Consumer Price Index without having to go through rulemaking procedures.

FISCAL EFFECT:

Unknown additional penalty revenue, which would be deposited into the Air Pollution Control Fund.

COMMENTS:

1. Background. To address transportation sector emissions, both ARB and U.S. EPA regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain emissions standards. In California, manufacturers must additionally demonstrate compliance with state air-quality standards and manufacturers who fail to comply are subject to civil penalties and other enforcement actions.
2. Purpose. According to the author's office, ARB's current penalty levels were established in the 1970s, and over time, the penalty amount has degraded in its deterrent effect as the price of cars and other large equipment has risen significantly. Despite the state's strict emissions standards and worst-in-the-nation air pollution, the state’s penalty levels have trailed far behind those at the federal level for similar violations.

AB 1685 brings California’s penalties for mobile source violations in line with their federal counterparts in order to more effectively deter noncompliance with the state’s air quality regulations, thus better protecting public health and the environment, preventing unfair competition for those manufacturers playing by the rules, and ensuring that California meets its pollution reduction and climate goals.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: April 18, 2016

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

ABPCA Bill Id:AB 1685 (

Author:Gomez) – As Amended Ver:April 11, 2016

SUBJECT: New motor vehicles: emission standards: civil penalties

SUMMARY: Updates civil penalties for violations of California Air Resources Board (ARB) regulations, orders, or rules, to bring penalty assessments into alignment with those of the United States Environmental Protection Agency (U.S. EPA). Specifically, this bill:

1. Increases civil penalties for violations of certain air quality orders, rules, or regulations adopted by ARB from a maximum amount of $500 to a maximum of $37,500 per action and requires, for violations committed by a manufacturer or distributor, that payment of penalties be a condition for further sales by the manufacturer or distributor.
2. Provides that violations involving portable fuel containers or small off-road engines remain subject to civil penalties of $500 per unit.
3. Expands penalties for selling motor vehicles or engines in the state that do not meet ARB requirements to include businesses or persons who reside outside the state and includes activities such as advertising and introducing commerce into the state.
4. Deletes provisions defining an established place of business as a place actually occupied either continuously or at regular periods in order to include internet-based businesses.
5. Expands penalties from a maximum of $5,000 to $37,000 per action for violations of ARB regulations committed by a manufacturer or distributor and requires that payment of penalties be a condition to further motor vehicle sales by the manufacture or distributor in California.
6. Increases from $5,000 to $37,500, per action, the penalty for any manufacturer who sells, as specified, any new motor vehicle that fails to meet applicable emissions standards.
7. Authorizes ARB to order a manufacturer to bring its vehicles into emissions configuration to which they were certified and compliance with this requirement be a condition of further sale of motor vehicles in California.
8. Authorizes ARB to adjust the maximum penalties for failure to comply with specified regulations for inflation based on the California Consumer Price Index without the requirement to go through rulemaking procedures.
9. Makes related, clarifying amendments.

EXISTING LAW:

1. Requires that persons who violates any ARB order, rule, or regulation, where there is not a penalty described for the specific violation, shall be subject to a civil penalty not to exceed $500 per vehicle, portable fuel container, spout, engine, or other unit subject to regulation and that the penalty be collected by the State Treasurer and deposited into the Air Pollution Control Fund.
2. Provides that manufacturers or distributors who do not comply with emission standards or test procedures adopted by ARB may be subject to civil penalties of $50 per vehicle that is not in compliance and that no further sales of the vehicles can take place until the penalty is paid.
3. Prohibits residents or businesses from importing, delivering, purchasing, renting, leasing, acquiring, or receiving a new motor vehicle or vehicle engine for use or resale in the state unless the engine has been certified compliant with ARB standards, as specified, with violations set at $5,000 per vehicle.
4. Prohibits new vehicles from being sold in California that do not meet the emissions standard adopted by ARB.
5. Provides penalties of $5,000 per action, for manufacturers who sell, attempt to sell, or offer for sale, a new vehicles that does not meet ARB emission standards.
6. Requires that any manufacturer or distributor who fails to comply with ARB emissions standards or the test procedures adopted by ARB be subject to a civil penalty of $50 for each vehicle that does not comply with the standards or procedures, and that penalties must be paid as a condition of further sale by the manufacturer or distributor in California.
7. Provides, pursuant to federal law, that violators be subject to civil penalties up to $37,500 per non-compliant vehicle or engine, $3,750 per tampering event or sale of defeat device, and $37,500 per day for reporting and recordkeeping violations.

FISCAL EFFECT: Unknown

COMMENTS: Both nationally and statewide, the transportation sector is known to be a major contributor of criteria pollutants and climate change emissions. To address transportation sector emissions, both ARB and U.S. EPA regulations require that, prior to introducing a vehicle for sale, a manufacturer must demonstrate that the vehicle meets certain emissions standards. In California, manufacturers must additionally demonstrate compliance with state air-quality standards and manufacturers who fail to comply are subject to civil penalties and other enforcement actions.

As with the federal program, vehicles are not legal for sale in California until they are certified to be compliant with state emissions standards. To be certified by ARB, a vehicle must demonstrate that its exhaust and emission-control systems are durable and comply with the emission standards for the vehicle's useful life. This is done through durability and certification testing of the prototype certification vehicles.

In California, an application for certification must be submitted to, and approved by, both the ARB and U.S. EPA concurrently. ARB's In-Use Compliance Program aims to ensure that manufacturers' vehicles meet emissions standards throughout their useful lives. The program obtains a limited sample of vehicles from a given test group or engine family and duplicates the manufacturers' vehicle emissions certification tests.

On September 3, 2015, representatives of Volkswagen (VW) admitted to the U.S. EPA and ARB that a large number of their vehicle engines had been designed and manufactured with a “defeat device” designated to bypass, or render inoperative, elements of the vehicles’ emissions control system. As a result, these vehicles were able to pass emissions tests despite exceeding federal emissions standards by up to 40 times. According to vehicle sales data, there are estimated to be 617,000 of these vehicles nationally, 79,400 of which are in California.

In a joint hearing entitled Volkswagen's "Defeat Device:" Update and Implications for California held by the Senate Transportation and Housing and Environmental Quality Committees on Tuesday March 8, 2016, the Legislature was updated with regard to how the defeat device was discovered, VW's admissions, ARB and U.S. EPA's actions, the status of federal litigation, and the overall effect of the issue on California's air quality, among other things. In the background paper for the hearing, the Committees encouraged the Legislature to consider creating stronger penalties to discourage non-compliance by automobile manufacturers, particularly given that federal penalties are substantially higher and that penalties for non-compliance in California were set in the 1970 and have not been indexed to inflation. The Committees suggested that existing ARB penalties do not provide sufficient deterrent, particularly for egregious actions to circumvent emissions requirements, such as in case of VW.

To ensure that California's air quality laws and regulations are followed, and to better align fines with federal penalties, the author has introduced AB 1685 which would increase the maximum penalties for mobile source violations. By increasing ARB's fines, the author believes that overall compliance will be improved. Specifically, this bill would increase the maximum penalty for mobile source violations from $500 to $37,500, while retaining the current lower penalty amount for smaller, less egregious, violations and violations for lower-value equipment such as off-road engines and fuel containers. Additionally, AB 1685 would modernize statutes to allow penalties to be extended to manufacturers outside of the state to better reflect modern business practices whereby vehicles are advertised and sold over the internet (from locations outside of California). Lastly, this bill would allow ARB to periodically update mobile source penalties by indexing them to inflation thereby ensuring that penalties maintain their deterrent effect over time.

Committee comments: While increasing penalties will no doubt provide a deterrent to violating state air quality laws and regulations, increasing penalties from what are now $500-$5,000 to $37,500 could, if not judiciously applied, be overly punitive. This concern, was highlighted by the Legislature with the passage of SB 1402 (Dutton), Chapter 413, Statutes of 2010, which required ARB to provide a written explanation prior to imposing administrative or civil penalties for a violation of air pollution laws and to make those explanations available to the public.

In a report developed pursuant to SB 1402, ARB outlined its penalty policy explaining the process by which they work to consistently reach swift and fair resolution of violations. In their report, ARB notes that to be fair, they take into account the specific circumstances for each enforcement case when reaching a penalty determination. ARB also notes in the report, that while there is not a "mathematical formula" that is applied when calculating penalties, they do weigh individual circumstances, make comparisons between individual cases, and take into account individual circumstances. ARB also provides that penalty determinations are designed specifically to prevent harm to the public and the environment and are tailored so as not to create undue financial hardship.

ARB's Enforcement Penalty Policy also describes the process whereby ARB's Enforcement Division consistently engages regulated industries and business in developing, understanding, and complying with regulations adopted by ARB. This ensures that the regulated community is aware of and has the ability to comply with pertinent air quality and emissions-related laws and regulations.

Related legislation: ACR 112 (Hadley), thanks ARB for its exemplary work and tenacity in uncovering emissions control defeat devices on certain diesel-fueled VW motor vehicles.
ACR 112 is scheduled to be heard in the Assembly Natural Resources Committee on
May 2, 2016.

Previous legislation: SB 1402 (Dutton), Chapter 413, Statutes of 2010, required ARB to provide a specified written explanation prior to imposing an administrative or civil penalty for a violation of air pollution law, make these explanations available to the public, annually report specified administrative penalties imposed, and publish a penalty policy pertaining to vehicular air pollution control.

AB 1085 (Mendoza), Chapter 384, Statutes of 2009, required the ARB to release all technical data that is used to develop regulations prior to the comment period of any proposed regulation.

SB 163 (Johannessen), Chapter 966, Statutes of 1995, expanded ARB’s authority to assess and enforce administrative penalties by allowing them to adopt rules and regulations pertaining to fuel requirements and standards.

REGISTERED SUPPORT / OPPOSITION:

Support

American Lung Association in California

Bay Area Air Quality Management District

Breathe California

Clean Power Campaign

Coalition for Clean Air

Natural Resources Defense Council

Sierra Club California

Opposition

None on file

Analysis Prepared by: Victoria Alvarez / TRANS. / (916) 319-2093