Existing law imposes various limitations on emissions of air contaminants for the control of air pollution from vehicular and nonvehicular sources. Existing law generally designates the State Air Resources Board as the state agency with the primary responsibility for the control of vehicular air pollution and air pollution control and air quality management districts with the primary responsibility for the control of air pollution from all sources other than vehicular sources.

Existing law, upon the appropriation of funds by the Legislature, requires the state board to allocate funds on a competitive basis for projects that are shown to achieve the greatest emission reductions from each emission source identified as specified, from activities related to the movement of freight along Californias trade corridors, commencing at the states airports, seaports, and land ports of entry.

This bill would, until January 1, 2032, enact the Lower Emissions Transition Program. The program would be administered by the state board and would require the state board to approve projects that reduce cumulative emissions from cargo handling equipment, as defined, sources at seaports in the state during the transition period to zero-emissions cargo handling equipment requirements. The bill would prohibit the approval of a project after the compliance date required by any applicable statute, regulation, or rule that requires a change in equipment to a zero-emission standard. The bill would require the state board to establish guidelines to determine eligibility for project approvals. The bill would describe certain types of eligible projects and would require the state board to approve projects that meet specified criteria. The bill would require the state board to establish an application fee, as specified. The bill would require the application fees to be deposited in the Air Pollution Control Fund and made available to the state board upon appropriation by the Legislature. The bill would establish eligibility criteria for projects. The bill would require the state board, by January 1, 2027, and January 1, 2031, to evaluate the impact of the program on state and local clean air efforts to meet state and local clean air goals and to hold at least one public workshop before completing the evaluation.

Existing law imposes various limitations on emissions of air contaminants for the control of air pollution from vehicular and nonvehicular sources. Existing law generally designates the State Air Resources Board as the state agency with the primary responsibility for the control of vehicular air pollution and air pollution control and air quality management districts with the primary responsibility for the control of air pollution from all sources other than vehicular sources.

Existing law, upon the appropriation of funds by the Legislature, requires the state board to allocate funds on a competitive basis for projects that are shown to achieve the greatest emission reductions from each emission source identified as specified, from activities related to the movement of freight along Californias trade corridors, commencing at the states airports, seaports, and land ports of entry.

This bill would, until January 1, 2035, 2032, enact the Lower Emissions Transition Program. The program would be administered by the state board and would require the state board to approve projects that reduce cumulative emissions from cargo handling equipment, as defined, sources at seaports in the state during the transition period to zero-emissions cargo handling equipment requirements. The bill would prohibit the approval of a project after the compliance date required by a state or federal law, as provided, any applicable statute, regulation, or rule that requires a change in equipment to a zero-emission standard. The bill would require the state board to establish guidelines to determine eligibility for project approvals and would authorize approvals. The bill would describe certain types of eligible projects and would require the state board to approve projects that meet specified criteria. The bill would require the state board to establish an application fee, as specified. The bill would require the application fees to be deposited in the Air Pollution Control Fund and made available to the state board upon appropriation by the Legislature. The bill would establish eligibility criteria for projects. The bill would require the state board, by January 1, 2033, 2027, and January 1, 2031, to evaluate the impact of the program on state and local clean air efforts to meet state and local clean air goals and to hold at least one public workshop before completing the study. evaluation.

Existing law imposes various limitations on emissions of air contaminants for the control of air pollution from vehicular and nonvehicular sources. Existing law generally designates the State Air Resources Board as the state agency with the primary responsibility for the control of vehicular air pollution and air pollution control and air quality management districts with the primary responsibility for the control of air pollution from all sources other than vehicular sources.

Existing law, upon the appropriation of funds by the Legislature, requires the state board to allocate funds on a competitive basis for projects that are shown to achieve the greatest emission reductions from each emission source identified as specified, from activities related to the movement of freight along Californias trade corridors, commencing at the states airports, seaports, and land ports of entry.

This bill would, until January 1, 2035, enact the Less-Than-Zero-Emissions Incentive Lower Emissions Transition Program. The program would be administered by the state board and would require the state board to approve projects that reduce cumulative emissions from cargo handling equipment, as defined, and from emissions sources at seaports in the state. state during the transition period to zero-emissions cargo handling equipment requirements. The bill would prohibit the approval of a project after the compliance date required by a state or federal law, as provided, that requires a change in equipment to a zero-emission standard. The bill would require the state board to establish guidelines to determine eligibility for project approvals and would authorize the state board to establish an application fee, as specified. The bill would require the application fees to be deposited in the Air Pollution Control Fund and made available to the state board upon appropriation by the Legislature. The bill would establish eligibility criteria for projects. The bill would require the state board, by January 1, 2033, to evaluate the impact of the program on state and local clean air efforts to meet state and local clean air goals and to hold at least one public workshop before completing the study.

Existing law imposes various limitations on emissions of air contaminants for the control of air pollution from vehicular and nonvehicular sources. Existing law generally designates the State Air Resources Board as the state agency with the primary responsibility for the control of vehicular air pollution and air pollution control and air quality management districts with the primary responsibility for the control of air pollution from all sources other than vehicular sources.

Existing law, upon the appropriation of funds by the Legislature, requires the state board to allocate funds on a competitive basis for projects that are shown to achieve the greatest emission reductions from each emission source identified as specified, from activities related to the movement of freight along Californias trade corridors, commencing at the states airports, seaports, and land ports of entry.

This bill would, until January 1, 2035, enact the Less-Than-Zero-Emissions Incentive Program. The program would be administered by the state board and would require the state board to approve projects that reduce emissions from cargo handling equipment, as defined, and from emissions sources at seaports in the state. The bill would prohibit the approval of a project after the compliance date required by a state or federal law, as provided, that requires a change in equipment to a zero-emission standard. The bill would require the state board to establish guidelines to determine eligibility for project approvals and would authorize the board to establish an application fee, as specified. The bill would require the application fees to be deposited in the Air Pollution Control Fund and made available to the state board upon appropriation by the Legislature. The bill would establish eligibility criteria for projects. The bill would require the state board, by January 1, 2033, to evaluate the impact of the program on state and local clean air efforts to meet state and local clean air goals and to hold at least one public workshop before completing the study.

Date of Hearing: May 10, 2023

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Chris Holden, Chair

ABPCA Bill Id:AB 1743

Author:(Bennett) – As Amended Ver:April 27, 2023

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

SUMMARY:

This bill enacts the Lower Emissions Transition Program (Program) and would require the Air Resources Board (ARB) to approve projects that reduce cumulative emissions from cargo handling equipment (CHE) at seaports during the transition period to zero-emissions requirements.

Specifically, this bill:

1. Requires ARB to administer and determine eligibility for the Program, specifies various eligibility and project approval criteria, requires ARB to establish Program guidelines, as specified, and exempts these guidelines from the Administrative Procedure Act.
2. Prohibits a project from being approved pursuant to this bill after the compliance date required by any applicable statute, regulation, or rule that otherwise requires the change in equipment to a zero-emission standard.
3. Requires the quantity of surplus emissions reductions that demonstrate lower cumulative emissions under a project than from compliance with the applicable zero-emission equipment statute, regulation, or rule shall be evaluated by ARB pursuant to the methodology established by ARB.
   
4. Requires ARB to establish an application fee limited to an amount that will partially offset the administrative costs of processing project applications, and requires fees to be deposited in the Air Pollution Control Fund and made available to ARB for purposes of this bill, upon appropriation by the Legislature.
5. Prohibits, with certain exceptions, the retirement, replacement, retrofit, or repower of CHE purchased pursuant to an approved project under the Program from being required by any rule or regulation adopted by ARB until the end of the useful life of the equipment as established by ARB for each piece of equipment, or by January 1, 2037, whichever date is earlier.
6. Requires ARB, by January 1, 2027, and January 1, 2031, to evaluate the impact of this bill on state and local clean air efforts to meet clean air goals, and requires ARB to hold at least one public workshop prior to the completion of this evaluation.
7. Sunsets the Program on January 1, 2032.

FISCAL EFFECT:

ARB estimates costs of approximately $1.8 million for eight positions in fiscal year (FY) 2023-24 and $1.6 million for seven positions in FY 2024-25 and ongoing (Air Pollution Control Fund) to implement this bill. Tasks include (1) developing Program guidelines and criteria, (2) developing a methodology to evaluate nitrogen oxides (NOx), particulate matter (PM), and greenhouse gas (GHG) emissions for eligible projects, (3) evaluating emissions from each competitive application, and (4) evaluating overall reductions achieved by the Program to ensure the reductions meet the criteria specified in this bill.

There are 62 port terminals statewide that could potentially apply for funding under the proposed Program. ARB used an average between 25% and 75% of terminals submitting applications to determine its cost estimate.

COMMENTS:

1) Purpose. According to the author:

AB 1743 would allow ports flexibility in replacing existing, dirtier, equipment with cleaner technologies today, but only if they meet very high evidentiary standards. The key is to be sure there is truly a significant net reduction in emissions over the life of the equipment including comparing it to likely new emissions standards. Ports need certainty that their investment is not a stranded asset and the public needs certainty that there is a certifiably significant overall long-term decrease in emissions that would not take place if the ports wait. This bill would require ports to prove, to the satisfaction of the California Air Resources Board, that the equipment they are purchasing would offer greater emissions reductions, over the lifetime of the equipment, than what would occur if they simply comply with regulatory mandates.

2) Background. California has 12 ports, through which large volumes of goods are both imported and exported internationally. These ports process about 40% of all containerized imports and 30% of all exports in the United States. In recent years, California’s ports have faced several challenges, including congestion and air pollution from associated facilities and vehicles. The Ports of Los Angeles and Long Beach remain some of the largest sources of air pollution in the South Coast Air Basin. CHE such as yard trucks, rubber-tired gantry cranes, container handlers, and forklifts are central to port operations. Historically, most port equipment has been powered by diesel or gasoline. Communities that neighbor ports face the highest exposure of air pollutants from port operations.

Cargo Handling Equipment Regulation to Transition to Zero-Emissions. ARB’s CHE was first adopted in 2005 to reduce toxic and criteria emissions to protect public health and remains in effect until amended or superseded with new requirements. ARB plans to consider amendments to its CHE regulation in 2024 to transition to zero-emissions. This action could potentially achieve emission reductions of criteria pollutants, air toxics, and GHG, beginning in 2026, with over 90% penetration of zero-emission equipment by 2036. The proposed changes to the CHE regulation are in line with the 2022 Scoping Plan, which calls for 100% of CHE to be zero-emission by 2037 and 100% of drayage trucks to be zero-emission by 2035.

Lower Emissions Transition Program. The Legislative Analyst’s Office (LAO) 2022 “Overview of California’s Ports” report suggests to reduce emissions in the long term, ports will need to electrify their heavy-duty fleets. The LAO identified several barriers that impede ports’ progress in pursuing this goal, including: (1) certain electric vehicles and equipment are not yet widely available, (2) costs are high, and (3) current battery reliability may not suit port operations. The LAO suggested that given the scope of the types of equipment and vehicles that will need to be electrified across all California ports, the costs could easily reach billions of dollars. Writing in support of this bill, the Pacific Merchant Shipping Association states:

AB 1743 is consistent with the State’s goals and the Ports’ goals to prioritize short-term investments in clean and alternative fueling infrastructure and in heavy-duty vehicles that reduce diesel emissions burdens on impacted communities and criteria pollutants. The Lower Emissions Transition Program is a modest step in support of these efforts in light of the massive and unprecedented scale of investments which will be necessary to transform the freight sector in the near future. Under this program, short-term investments in hybrids and alternative fuels will be encouraged and protected, but only if CARB determines that they will result in air quality improvements consistent with its regulatory timetables for the transition to zero-emissions.

It is important to note that zero-emission CHE is already being deployed by many of the state’s ports, and there are state and federal incentives available to aid in the transition to zero-emission equipment. For example, in 2018, ARB announced up to $205 million in grants for projects designed to accelerate the adoption of clean freight technologies and reduce air pollution caused by goods movements throughout the state, including zero-emission CHE. In 2019, ARB announced the launch of a $40 million program for the Clean Off-Road Equipment Voucher Incentive Project, which provided funding for zero-emission equipment including terminal tractors, transport refrigeration units, CHE, and more. In 2022, the Port of Long Beach announced it will receive a $30 million grant from the U.S. Department of Transportation to deploy the nation’s largest fleet of manually operated, zero-emission CHE at a single marine terminal.

Analysis Prepared by: Nikita Koraddi / APPR. / (916) 319-2081

Date of Hearing: April 24, 2023

ASSEMBLY COMMITTEE ON NATURAL RESOURCES

Luz Rivas, Chair

ABPCA Bill Id:AB 1743 (

Author:Bennett) – As Amended Ver: April 10, 2023

SUBJECT: Lower Emissions Transition Program

SUMMARY: Enacts the Lower Emissions Transition Program (Program) and would require the Air Resources Board (ARB) to approve projects that reduce cumulative emissions from cargo handling equipment, and sources at seaports in the state during the transition period to zero-emissions cargo handling equipment requirements.

EXISTING LAW:

1. Pursuant to the California Global Warming Solutions Act of 2006 (Health and Safety Code (HSC) 38500 et seq.):
   1. Establishes Air Resources Board (ARB) as the state agency responsible for monitoring and regulating sources emitting greenhouse gas (GHG) emissions.
   2. Requires the GHG emissions reduction limit, pursuant to AB 1279 (Muratsuchi, Chapter 337, Statutes of 2022) to be at least 85% below the 1990 level by 2045, and establishes a goal of zero net carbon emissions by 2045, commonly known as carbon neutrality.
   3. Requires ARB to prepare and approve a scoping plan for achieving the maximum technologically feasible and cost-effective reductions in GHG emissions from sources or categories of sources of GHGs. Requires ARB to consult with all state agencies with jurisdiction over sources of GHGs. Requires the Scoping Plan to identify and make recommendations on direct GHG emissions reduction measures, among other things. Requires ARB to update Scoping Plan for at least once every five years.
2. Establishes the Charge Ahead California Initiative that, among other things, includes the goal of placing at least one million ZEV and near-zero emission vehicles into service by January 1, 2023, and increasing access to these vehicles for disadvantaged, low-income, and moderate income communities and consumers. (HSC 22458)
3. Establishes the Air Quality Improvement Program (AQIP), administered by ARB in consultation with local air districts, to fund programs that reduce criteria air pollutants, improve air quality, and provide research for alternative fuels and vehicles, vessels, and equipment technologies. (HSC 44274)
4. Requires ARB to allocate funds on a competitive basis for projects that are shown to achieve the greatest emission reductions from each emission source identified as specified, from activities related to the movement of freight along California’s trade corridors, commencing at the state’s airports, seaports, and land ports of entry.
5. Establishes the Mobile Cargo Handling Equipment at Ports and Intermodal Rail Yards (CHE) Regulation to reduce toxic and criteria emissions (13 California Code of Regulations 2479)

THIS BILL:

1. Establishes the Program.
2. Defines the following terms used in the bill:
   1. “Cargo handling equipment” or “covered equipment” as any off-road, self-propelled vehicle or equipment used at a port or intermodal rail yard to lift or move container, bulk, or liquid cargo carried by ship, train, or another vehicle, or used to perform maintenance and repair activities that are routinely scheduled or that are due to predictable process upsets. Cargo handling equipment includes, but is not limited to, rubber-tired gantry cranes, yard trucks, top handlers, side handlers, reach stackers, forklifts, loaders, aerial lifts, excavators, and dozers. Cargo handling equipment does not include any yard truck that is licensed as an on-road vehicle;
   2. “Lower emission equipment” as any nondiesel or hybridized diesel equipment that incorporates other technologies that significantly reduce criteria pollutants, toxic air contaminants, or GHG emissions, utilizes zero-emission technologies, or enables technologies that provide a pathway to zero-emissions operation;
   3. “Repower” as to replace an existing engine with a newer engine or power source; and,
   4. “Zero-emission equipment” means any equipment that produces no emissions of criteria pollutants, toxic air contaminants, and GHGs when stationary or operating.
3. Requires ARB to administer the Program.
4. Requires the Program to approve projects that reduce cumulative emissions from applicable cargo handling equipment sources at seaports in the state during the transition period to zero-emission cargo handling equipment requirements.
5. Requires eligibility for project approvals to be determined by ARB.
6. Prohibits a project from being approved after the compliance date required by any applicable statute, regulation, or rule that otherwise requires the change in equipment to a zero-emission standard.
7. Requires the quantity of surplus emissions reductions that demonstrate lower cumulative emissions under a project than from compliance with applicable zero-emission equipment statute, regulation, or rule shall be evaluated by ARB pursuant to the methodology established by ARB.
8. Provides that eligible projects include, but are not limited to, any of the following:
   1. Purchase of new lower emission or zero-emission covered equipment in operation at a seaport;
   2. Emission-reducing retrofit of covered equipment, or replacement of old engines powering covered equipment with newer lower emission or zero-emission engines, motors, or drives; and,
   3. Development and demonstration of lower emission and zero-emission retrofit technologies, repower options, and advanced technologies for covered equipment.
9. Prohibits a project from being deemed ineligible for approval solely on the basis that lower emission or zero-emission equipment is purchased with the use of any state or federal grant funding, funded or used for credit under any state or federal emissions averaging, banking, or trading program, or participates in any other voluntary emission reduction program.
10. Prohibits a project from being deemed ineligible for approval solely on the basis that the purchase of lower emission or zero-emission equipment is entered into pursuant to a corporate or a controlling board’s policy, tenancy agreement, port lease, or any other contract, so long as the project is approvable.
11. Authorizes eligible applicants to be any individual, company, or public agency that owns one or more pieces of cargo handling equipment that operate at a seaport in the state and that is not out of compliance with existing state board regulations that cover cargo handling equipment.
12. Requires ARB to establish guidelines for determining eligibility for projects under the Program. Requires the guidelines to include all of the following:
    1. A methodology for evaluating cumulative emissions reductions of nitrous oxides emissions;
    2. A methodology for evaluating cumulative emissions reductions of diesel particulate matter;
    3. A methodology for evaluating cumulative emissions reductions of GHGs;
    4. A methodology for determining the useful life for a piece of cargo handling equipment;
    5. A methodology for evaluating the cumulative emission reductions, as specified, for the repower of cargo handling equipment purchased pursuant to an approved project under this chapter; and,
    6. A baseline emissions profile for regulated emissions reductions of nitrous oxides, diesel particulate matter, and greenhouse gases based on the application of both the current applicable statutes, regulations, and rules regarding cargo handling equipment regulation and the future compliance date for zero-emission cargo handling equipment applicable as established, if a date is not yet adopted, the 2037 target date for zero-emission cargo handling equipment established in the plan adopted by ARB pursuant to the California Global Warming Solutions Act of 2006 or that date as amended and updated by ARB pursuant to applicable law.
13.  The establishment of guidelines by this section is not subject to the rulemaking requirements of the Administrative Procedure Act (APA).
14. Requires projects to be approved by ARB if they meet all of the following:
    1. Demonstrate cumulative emissions reductions of nitrous oxides greater than the regulatory baseline over the useful life of the cargo handling equipment identified in a project application;
    2. Demonstrate cumulative emissions reductions of diesel particulate matter greater than the regulatory baseline over the useful life of the cargo handling equipment identified in a project application;
    3. Demonstrate cumulative emissions reductions of GHGs greater than the regulatory baseline over the useful life of the cargo handling equipment identified in a project application. At the discretion of ARB, cumulative emissions reductions of GHGs may be required to include a commitment of payment to purchase GHG offsets of at least 10% greater than the regulatory baseline over the useful life of the cargo handling equipment in the time, place, and manner established by ARB. If required by ARB, the full value of this amount shall be paid or bonded as a condition of approval at the discretion of ARB; and,
    4. An application was provided to ARB for a project approval prior to January 1, 2030.
15. Prohibits ARB from approving a project that fails to demonstrate emissions reductions of nitrous oxides and diesel particulate matter that are at least 10% greater than the regulatory baseline at the time of project application.
16. Requires ARB to maintain discretion to approve the repower of cargo handling equipment purchased pursuant to an approved project based on the specified evaluation methodology.
17. Requires project applicants to submit all information required by ARB at the time of submission and upon subsequent request as necessary to process the application.
18. Requires ARB to establish an application fee limited to an amount that will partially offset the administrative costs of processing project applications. Application fees shall be deposited in the Air Pollution Control Fund and made available to ARB for those purposes upon appropriation by the Legislature.
19. Prohibits the retirement, replacement, retrofit, or repower of cargo handling equipment purchased pursuant to an approved project under the Program from being required by any rule or regulation adopted by ARB until the end of the useful life of the equipment as established by ARB for each piece of equipment or January 1, 2045, whichever date is earlier.
20. Requires ARB, by January 1, 2027, and January 1, 2031, evaluate the impact of the provisions of this chapter on state and local clean air efforts to meet state and local clean air goals.
21. Requires ARB to hold at least one public workshop prior to the completion of the evaluations required.
22. Sunsets the Program on January 1, 2032.

FISCAL EFFECT: Unknown.

COMMENTS:

1. Need for the bill. According to the author:

AB 1743 would allow ports flexibility in replacing existing, dirtier, equipment with cleaner technologies today, but only if they meet very high evidentiary standards. The key is to be sure there is truly a significant net reduction in emissions over the life of the equipment including comparing it to likely new emissions standards. Ports need certainty that their investment is not a stranded asset and the public needs certainty that there is a certifiably significant overall long-term decrease in emissions that would not take place if the ports wait. This bill would require ports to prove, to the satisfaction of the California Air Resources Board, that the equipment they are purchasing would offer greater emissions reductions, over the lifetime of the equipment, than what would occur if they simply comply with regulatory mandates. This bill does not weaken current standards but it can accelerate the greening of port equipment if the port meets a high evidentiary bar. The sooner we reduce emissions at the port, the sooner we will be able provide disadvantaged port communities with better air quality and make progress on meeting our climate goals.

1. Air quality at California’s ports. Shipping containers are large standardized containers designed to be used across different modes of transport—from ship to rail to truck—without unloading or reloading the cargo. Container ports are facilities where cargo or shipping containers are transshipped between different vehicles and machinery to move goods, both containerized and bulk. Cargo handling equipment such as yard trucks (hostlers), rubber-tired gantry cranes, container handlers, and forklifts are central to port operations. Historically, most port equipment has been powered by diesel or gasoline.

California has 12 ports, through which large volumes of goods are both imported and exported internationally. These ports process about 40% of all containerized imports and 30% of all exports in the United States.  In recent years, California’s ports have faced several challenges, including congestion and air pollution from associated facilities and vehicles. The Ports of Los Angeles and Long Beach remain some of the largest sources of air pollution in the South Coast Air Basin. These ports are responsible for about 10% of the basin’s total nitrogen oxide (NOx) emissions.

Air pollution from port activities has significant public health and environmental implications. Exposure to air pollution is associated with an increased risk of heart and lung disease, increased cancer risk, and increased respiratory symptoms. Harmful emissions also have been associated with negative impacts on birth and developmental outcomes, such as low birth weight, premature births, and lower lung function in children. In addition, diesel fuel consumption emits GHGs, which accelerates climate change.

1. Coastal community impacts. Communities that neighbor ports face the highest exposure of air pollutants from port operations. As a result, these communities tend to experience a disproportionate share of the pollution burden in the state. For example, nearly all of the census tracts that surround the Ports of Long Beach and Los Angeles are ranked in the top one-third of the most pollution burdened in the state, according to the California Communities Environmental Health Screening Tool (CalEnviroScreen), a tool which assesses communities’ pollution burden and vulnerability. In addition to greater exposure, these communities also are relatively more vulnerable to pollution impacts. This is because these areas tend to have (1) a higher share of sensitive populations—those with physiological conditions, such as asthma and heart disease, that make them more vulnerable to pollutants—and (2) socioeconomic factors associated with higher pollution vulnerability, such as poverty and lower educational attainment. This combination of disproportionately high pollution exposure and vulnerability results in the neighborhoods adjacent to the Long Beach and Los Angeles ports scoring in the top quartile for their overall CalEnviroScreen assessment. Such a score indicates high levels of cumulative environmental and health impacts, and identifies these areas as “disadvantaged communities” eligible for prioritized funding from certain state programs.
2. Cargo Handling Equipment Regulation to Transition to Zero-Emissions. Mobile cargo handling equipment is any motorized vehicle used to handle cargo or perform routine maintenance activities at California’s ports and intermodal rail yards. The type of equipment includes off-road, self-propelled vehicle or equipment used at a port or intermodal rail yard to lift or move container, bulk, or liquid cargo carried by ship, train, or another vehicle, or used to perform maintenance and repair activities that are routinely scheduled or that are due to predictable process upsets. Equipment includes, but is not limited to, rubber-tired gantry cranes, yard trucks, top handlers, side handlers, reach stackers, forklifts, loaders, aerial lifts, excavators, and dozers.

ARB’s CHE Regulation was adopted in 2005 to reduce toxic and criteria emissions to protect public health and was fully implemented by the end of 2017 and remains in full effect until amended or superseded with new requirements.

ARB resolution 17-8 adopted in March 2017 directed ARB staff to develop new regulatory requirements for CHE that will require up to 100% zero-emissions technologies at ports and intermodal railyards by 2030. In March 2018, ARB staff presented a plan to begin development of a regulation to minimize emissions and community health impacts from cargo handling equipment. The CHE regulation sets in-use requirements for diesel cargo handling equipment at ports and rail yards.  Staff would assess the availability and performance of zero-emission technology as an alternative to all combustion-powered cargo equipment and evaluate additional solutions that may include efficiency improvements. 

Proposed regulatory amendments, to be considered by ARB in 2024, would propose an implementation schedule for new equipment and facility infrastructure requirements, with effective dates beginning in 2026.  In this potential action, all mobile equipment at ports and rail yards, including but not limited to: diesel, gasoline, natural gas, and propane-fueled equipment, would be subject to new requirements.  ARB staff would also consider opportunities to prioritize the earliest implementation in or adjacent to the communities most impacted by air pollution.

This action could potentially achieve emission reductions of criteria pollutants, air toxics, and GHGs, beginning in 2026, with more than 90% penetration of zero-emission equipment by 2036. The proposed changes to the CHE Regulation are in line with the 2022 Scoping Plan, which calls for 100% of cargo handling equipment be zero-emission by 2037 and 100% of drayage trucks are zero emission by 2035.

1. New program. The Legislative Analyst’s Office (LAO) 2022 Overview of California’s Ports, suggests to reduce emissions in the long term, ports will need to electrify their heavy-duty fleets. The LAO identified several barriers that impede ports’ progress in pursuing this goal, including: (1) certain electric vehicles and equipment are not yet widely available, (2) costs are high, and (3) current battery reliability may not suit port operations. The LAO suggested that given the scope of the types of equipment and vehicles that will need to be electrified across all California ports, the costs could easily reach billions of dollars.

In recognition of the challenges the LAO reported, this bill would create the Lower Emissions Transition Program at ARB to approve projects that reduce cumulative emissions from cargo handling equipment, as defined, sources at seaports in the state during the transition period to zero-emissions cargo handling equipment requirements.

The bill would prohibit the approval of a project after the compliance date required by any applicable statute, regulation, or rule that requires a change in equipment to a zero-emission standard. The bill would require ARB to establish guidelines to determine eligibility for project approvals. The bill would describe certain types of eligible projects and would require the state board to approve projects that meet specified criteria.

The bill would require ARB to establish eligibility criteria for projects, and, by January 1, 2027, and January 1, 2031, evaluate the impact of the program on state and local clean air efforts to meet state and local clean air goals and to hold at least one public workshop before completing the evaluation. The bill sunsets the Lower Emissions Transition Program in 2032.

1. Offsets. Under AB 32, ARB adopted the cap-and-trade program as a market-based compliance mechanism to establish a declining limit on major sources of GHG emissions throughout California, and ARB creates allowances equal to the total amount of permissible GHG emissions (i.e., the “cap”). Each year, fewer allowances are created and the annual cap declines. Under the program, covered entities can invest in “offsets” – projects that sequester carbon in forests, flooded rice fields, biogas control systems for manure management on dairy cattle and swine farms, and others – to satisfy a small percentage of their overall compliance obligation. 

The bill would allow, at ARB’s discretion, cumulative emissions reductions of GHGs to be accounted for with a commitment of payment to purchase GHG offsets. Though the bill would require the offset to be at least 10% greater than the regulatory baseline over the useful life of the cargo handling equipment, allowing use of offsets presents a number of issues.

The point of the CHE regulations – and AB 32 – is to reduce GHG emissions at the source. While offsets offer compliance mechanisms for investing in carbon sequestration and other projects to meet the requirements under cap-and-trade, this bill does not put any parameters on how many offsets can be purchased (based on a percentage of overall GHG emissions), or whether more efficient equipment would need to be purchased once the useful life of the offset (i.e., the amount of GHGs that would be sequestered or avoided) is achieved.

Additionally, the bill isn’t clear on whether ARB would rely on the offset protocols for cap-and-trade or not, or if this bill would result in decreased emissions of air pollutants and GHGs.

1. Investments in lower-emission equipment may be getting the cart before the horse. The useful life of cargo handling equipment can be up to 22 years, so this bill will likely result in front loading the purchases of ‘not quite zero’ emission cargo equipment that would then be in service for up to 22 years – or longer. This bill would prohibit any rule or regulation requiring the retirement before 2045 of an emission-producing piece of equipment purchased under this Program, even though ARB is working on revising the CHE regulations to require 100% zero-emissions technologies at ports by 2030.

Investing in expensive equipment for a program that sunsets in 2032 may not be economically practical given the likely impending amendments in 2024 to the current CHE regulation and availability of zero emission equipment, but the bill is attempting to provide a stepping stone to compliance with zero emission requirements. And, the Program would be voluntary, so investments would only be made in new equipment if an entity chose to do so.

However, grandfathering in lower-emission equipment until 2045 – likely well past a zero emission regulatory requirement – runs counter to the states GHG and air quality laws. The 2045 date is intended to capture the average life span of the equipment, but the bill could be amended to better match ARB’s intended goal of 2037.

Furthermore, ARB administers the Zero- and Near Zero-Emission Freight Facilities Program to accelerate the adoption of clean freight technologies and reduce air pollution caused by the movement of goods throughout the state. Under the program, ARB provides funding to local air districts, other California public entities, and nonprofits, which may partner with private sector parties (e.g., end-users, manufacturers) for pre-commercial demonstrations of advanced vehicles, engines, equipment, and transportation systems. As of November 2022, ARB has allocated nearly $150 million, including to fund a hybrid tugboat and electric cranes and forklifts at the Port of Long Beach. Since its inception, the program has funded 49,622 metric tons estimated GHG emissions reductions.

This existing program could support the transition to zero emission technologies in the interim (before the CHE Regulations are updated), thus avoiding any complications of entities’ investments in expensive cargo handling equipment that will ultimately be noncompliant.

1. Committee amendments. The Committee may wish to consider amending the bill as follows:
   1. To remove the allowance of offsets, strike the language in Sec. 39905.3 (a)(3).

(3) Demonstrate cumulative emissions reductions of greenhouse gases greater than the regulatory baseline over the useful life of the cargo handling equipment identified in a project application. At the discretion of the state board, cumulative emissions reductions of greenhouse gases pursuant to this section may be required to include a commitment of payment to purchase greenhouse gas offsets of at least 10 percent greater than the regulatory baseline over the useful life of the cargo handling equipment in the time, place, and manner established by the state board. If required by the state board, the full value of this amount shall be paid or bonded as a condition of approval at the discretion of the state board.

• 1. To reduce the timeframe from 2045 to 2037 for which lower-emissions equipment can be exempt from potential future zero-emission requirements, except for rubber-tired gantry cranes, amend Sec. 39905.4 as follows:

1. Except for rubber-tired gantry cranes, the retirement, replacement, retrofit, or repower of cargo handling equipment purchased pursuant to an approved project under this chapter shall not be required by any rule or regulation adopted by the state board until the end of the useful life of the equipment as established by the state board for each piece of equipment pursuant to Section 39905.2 or January 1, 2045, 2037, whichever date is earlier.
2. The retirement, replacement, retrofit, or repower of rubber-tired gantry cranes purchased pursuant to an approved project under this chapter shall not be required by any rule or regulation adopted by the state board until the end of the useful life of the equipment as established by the state board for each piece of equipment pursuant to Section 39905.2 or January 1, 2045, whichever date is earlier.
3. Double referral. This bill was heard in the Assembly Transportation Committee on April 17 and approved 15-0.

REGISTERED SUPPORT / OPPOSITION:

Support

Elders Climate Action, Norcal and Socal Chapters
Pacific Merchant Shipping Association

Opposition

Sierra Club California

Analysis Prepared by: Paige Brokaw / NAT. RES. /

Date of Hearing: April 17, 2023

ASSEMBLY COMMITTEE ON TRANSPORTATION

Laura Friedman, Chair

ABPCA Bill Id:AB 1743 (

Author:Bennett) – As Amended Ver:April 10, 2023

SUBJECT: Lower Emissions Transition Program

SUMMARY: Creates the Lower Emissions Transition Program, administered by the California Air Resources Board (CARB), to approve projects that reduce cumulative emissions from cargo handling equipment sources at seaports during the transition period to zero-emission cargo handling equipment requirements. Specifically, this bill:

1. Prohibits CARB from approving a project after the compliance date required by any applicable statute, regulation, or rule that otherwise requires the change in equipment to a zero-emission standard.
2. Requires CARB to evaluate the quantity of surplus emissions reductions that demonstrate lower cumulative emissions under a project than from compliance with the applicable zero-emission equipment statute, regulation, or rule.
3. Lists eligible projects including, but not limited to:
4. Purchase of new lower emission or zero-emission covered equipment in operation at a seaport;
5. Emission-reducing retrofit of covered equipment, or replacement of old engines powering covered equipment with newer lower emission or zero-emission engines, motors, or drives; and,
6. Development and demonstration of lower emission and zero-emission retrofit technologies, repower options, and advanced technologies for covered equipment.
7. Prohibits a project from being deemed ineligible for approval solely on the basis that lower emission or zero-emission equipment is purchased with the use of any state or federal grant funding, funded or used for credit under any state or federal emissions averaging, banking, or trading program, or participates in any other voluntary emission reduction program.
8. Prohibits a project from being deemed ineligible for approval solely on the basis that the purchase of lower emission or zero-emission equipment is entered into pursuant to a corporate or a controlling board’s policy, plan, tenancy agreement, port lease, or any other contract, so long as the project is otherwise approvable by CARB.
9. Establishes eligible applicants as any individual, company, or public agency that owns one or more pieces of cargo handling equipment that operate at a seaport in the state and that is not out of compliance with existing CARB regulations that cover cargo handling equipment.
10. Requires CARB to establish guidelines for determining project eligibility, including methodologies for:
11. Evaluating cumulative emissions reductions of nitrous oxides (NOx), diesel particulate matter, and GHGs;
12. Determining the useful life of a piece of cargo handling equipment; and,
13. Evaluating the cumulative emission reductions for NOx, diesel particulate matter, and GHGs for the repower of cargo handling equipment purchased through an approved project.
14. Requires the guidelines for project eligibility to include a baseline emissions profile for regulated emissions reductions of NO_x, diesel particulate matter, and GHGs based on the application of both the current applicable statutes, regulations, and rules regarding cargo handling equipment regulation and the future state compliance date for zero-emission cargo handling equipment established by CARB, or, if a date is not yet adopted, the 2037 target date for zero-emission cargo handling equipment established in the AB 32 scoping plan.
15. Exempts the establishment of guidelines from the rulemaking requirements of the Administrative Procedure Act (APA).
16. Requires CARB to approve projects if they meet all of the following:
    1. The application was provided to CARB for approval prior to January 1, 2030.
    2. Demonstrate cumulative emissions reductions of NO_x, diesel particulate matter, and GHGs greater than the regulatory baseline over the useful life of the cargo handling equipment identified in a project application.
17. At CARB’s discretion, authorizes cumulative emissions reductions of GHGs to include a commitment of payment to purchase GHG offsets of at least 10% greater than the regulatory baseline over the useful life of the cargo handling equipment in the time, place, and manner established by CARB. Requires the full value of the offset amount, if required by CARB, to be paid or bonded as a condition of project approval.
18. Prohibits CARB from approving a project that fails to demonstrate emissions reductions of NO_x and diesel particulate matter that are at least 10% greater than the regulatory baseline at the time of project application.
19. Authorizes CARB to maintain discretion in approving the repower of cargo handling equipment.
20. Requires project applicants to submit all information required by CARB at the time of submission and upon request as necessary to process the application.
21. Requires CARB to establish an application fee, to be deposited in the Air Pollution Control Fund and made available upon appropriation, limited to an amount that will partially offset the administrative costs of processing project applications.
22. Prohibits CARB from adopting a rule or regulation requiring the retirement, replacement, retrofit, or repower of cargo handling equipment until the end of the useful life of the equipment or January 1, 2045, whichever date is earlier.
23. Requires CARB, by January 1, 2027 and January 1, 2033, to hold at least one public workshop and evaluate the impact of the Lower-Emissions-Transition-Program on state and local clean air efforts to meet state and local clean air goals.
24. Defines “cargo handling equipment” or “covered equipment” as any off-road, self-propelled vehicle or equipment used at a port or intermodal rail yard to lift or move container, bulk, or liquid cargo carried by ship, train, or another vehicle, or used to perform maintenance and repair activities that are routinely scheduled or that are due to predictable process upsets. Cargo handling equipment includes, but is not limited to, rubber-tired gantry cranes, yard trucks, top handlers, side handlers, reach stackers, forklifts, loaders, aerial lifts, excavators, and dozers. Cargo handling equipment does not include a yard truck that is licensed as an on-road vehicle.
25. Defines “lower emission equipment” as any nondiesel or hybridized diesel equipment that incorporates other technologies that significantly reduce criteria pollutants, toxic air contaminants, or GHGs, utilizes zero-emission technologies, or enables technologies that provide a pathway to zero-emission operation.
26. Defines “zero-emission equipment” as any equipment that produces no emissions of criteria pollutants, toxic air contaminants, and GHGs when stationary or operating.
27. Defines “repower” as replacing an existing engine with a newer engine or power source.
28. Makes related findings and declarations and statements of legislative intent.
29. Is repealed by its own provisions on January 1, 2032.

EXISTING LAW:

1. Establishes CARB as the air pollution control agency in California and requires CARB, among other things, to control emissions from a wide array of mobile sources and coordinate with local air districts to control emission from stationary sources in order to implement the Federal Clean Air Act. (Health and Safety Code (HSC) 39602; HSC 39602.5)
2. Requires CARB, pursuant to California Global Warming Solutions Act of 2006 (AB 32 (Núñez) Chapter 488, Statutes of 2006) to adopt a statewide GHG emissions limit equivalent to 1990 levels by 2020 and to develop a scoping plan for achieving the maximum technologically feasible and cost effective reductions in GHGs. (HSC 38500)
3. Requires, pursuant to SB 32 (Pavley) Chapter 249, Statutes of 2016 that CARB ensure that statewide GHG emissions are reduced to at least 40% below 1990 levels by 2030. (HSC 38566)
4. Provides, pursuant to the California Climate Crisis Act (AB 1279 (Muratsuchi) Chapter 337, Statutes of 2022) that it is the policy of the state to do both of the following:
   1. Achieve net zero GHG emissions as soon as possible but no later than 2045; and,
   2. Ensure that by 2045, GHG emissions are reduced to at least 85% below 1990 levels.

FISCAL EFFECT: Unknown

COMMENTS: A shipping containers is a large standardized container designed to be used across different modes of transport—from ship to rail to truck—without unloading or reloading the cargo. Container ports are facilities where cargo or shipping containers are transshipped between different vehicles and machinery to move goods, both containerized and bulk. Cargo handling equipment such as yard trucks (hostlers), rubber-tired gantry cranes, container handlers, and forklifts are central to port operations.

This bill defines “cargo handling equipment” as any off-road, self-propelled vehicle or equipment used at a port or intermodal rail yard to lift or move container, bulk, or liquid cargo carried by ship, train, or another vehicle; including, but not limited to, rubber-tired gantry cranes, yard trucks, top handlers, side handlers, reach stackers, forklifts, loaders, aerial lifts, excavators, and dozers as shown in the table below.

Historically, most port equipment has been powered by diesel or gasoline. Emissions from ports contribute to poor air quality that affects not only port workers, but also those who live and work in neighboring communities. Often these are low-income or disadvantaged communities. Diesel- and gasoline powered port equipment also produces GHGs, contributing to climate change. In recent years, several ports have set goals to become zero-emissions, or green, ports, including the Port of Hueneme in the author’s district, and the larger Ports of Long Beach and Los Angeles.

Source: Argonne National Laboratory, Cargo Handling Equipment at Ports, March 2022

Increasingly, cargo handling equipment may be powered by cleaner, alternative fuels, such as electricity, hydrogen, compressed natural gas (CNG), liquefied natural gas (LNG), and liquefied petroleum gas (LPG). Grid-powered cargo handling equipment, principally cranes, are a commercially available, mature technology, for container handling. The table below shows the types of fuel that various types of power cargo handling equipment can use.

Source: Argonne National Laboratory, Cargo Handling Equipment at Ports, March 2022

CARB adopted the Mobile Cargo Handling Equipment Regulation on December 8, 2005 to reduce toxic and criteria emissions to protect public health. The Regulation became effective on December 31, 2006 and was fully implemented by the end of 2017. The regulation requires cargo handling equipment to be the Best Available Control Technology and has achieved a 91% reduction in diesel particulate matter and a 74% reduction in oxides of nitrogen (NOx). CARB staff are currently assessing the availability and performance of zero-emission technology as an alternative to all combustion-powered cargo equipment and evaluating additional solutions that may include efficiency improvements.

CARB plans to amend this regulation in 2024 to transition cargo handling equipment to zero-emission. According to CARB, “The existing regulation sets in-use requirements for diesel cargo handling equipment at ports and rail yards, including but not limited to: yard trucks (hostlers), rubber-tired gantry cranes, container handlers, and forklifts. Staff would assess the availability and performance of zero-emission technology as an alternative to all combustion-powered cargo equipment and evaluate additional solutions that may include efficiency improvements. The regulatory amendments would propose an implementation schedule for new equipment and facility infrastructure requirements, with effective dates beginning in 2026. In this potential action, all mobile equipment at ports and rail yards, including but not limited to: diesel, gasoline, natural gas, and propane-fueled equipment, would be subject to new requirements. CARB staff would also consider opportunities to prioritize the earliest implementation in or adjacent to the communities most impacted by air pollution.”^[1]

This bill would create the Lower Emissions Transition Program to guide the replacement of cargo handling equipment that are not current subject to any regulation requiring declining emissions standards. This bill would require CARB to establish guidelines for eligibility and methodologies for determining emissions reductions of project applications. This bill, in return for terminal operators upgrading to newer, cleaner cargo handling equipment that has lower cumulative emissions of NO_x, diesel particulate matter, and GHGs, it would provide a useful life reassurance on the purchase and use of said equipment.

This bill would prohibit CARB from adopting a rule or regulation requiring the retirement, replacement, retrofit, or repower of cargo handling equipment until the end of the useful life of the equipment. As shown in the table below, the average useful life of cargo handling equipment ages range from 7 to 22 years. Additionally, all types of equipment, with the exception of yard trucks, have lives longer than 10 years. Average hours of operation are also shown in this table.

Source: Technology Assessment: Mobile Cargo Handling Equipment. CARB November 2015.

The sponsors of this bill, the Pacific Merchant Shipping Association (PMSA), represent marine terminal operators of West Coast ports. Marine terminal operators are private entities that provide wharfage, dock warehouse, or other marine terminal facilities to ocean common carriers moving cargo in ocean-borne commerce. Marine terminal operators are responsible for cargo handling activities (loading, unloading, and storage of goods) in seaports.

According to the author, “California’s eleven publicly owned ports, and our one privately owned port, are a crucial portion of the nation’s supply chain and goods movement. That also means that they serve as high sources of GHG emissions and harmful pollutants, including NOx and particulate matter, often from diesel emissions. Cleaning up our ports offers California a big return on investment, and creates an opportunity to utilize innovative technologies to clean up a hard to electrify sector. The Port of Hueneme, in my district, is working towards becoming a 100% green port, but faces a number of challenges, including providing enough electricity to port equipment and ships. While we should hold our ports to high standard, we should also allow them the opportunity to use creative solutions.

Ports could significantly clean up emissions now with new equipment. We should not wait and allow dirty equipment to continue to be used because ports are concerned the improved equipment may not meet future standards set during the useful life of the new equipment.

[This bill] would allow ports flexibility in replacing existing, dirtier, equipment with cleaner technologies today, but only if they meet very high evidentiary standards. The key is to be sure there is truly a significant net reduction in emissions over the life of the equipment including comparing it to likely new emissions standards. Ports need certainty that their investment is not a stranded asset, and the public needs certainty that there is a certifiably significant overall long-term decrease in emissions that would not take place if the ports wait. This bill would require ports to prove, to the satisfaction of CARB, that the equipment they are purchasing would offer greater emissions reductions, over the lifetime of the equipment, than what would occur if they simply comply with regulatory mandates. This bill does not weaken current standards, but it can accelerate the greening of port equipment if the port meets a high evidentiary bar. The sooner we reduce emissions at the port, the sooner we will be able provide disadvantaged port communities with better air quality and make progress on meeting our climate goals.”

In support, PMSA writes, “[This bill] would create pathways to maximize investments in temporary alternative fuel and cleaner equipment which exceed California’s already strict regulatory baselines prior to zero-emissions mandates. These incentives would create a stable environment thereby incentivizing the use and purchase of cleaner technologies during the zero-emissions transition, estimated by CARB to occur on an as-yet to be determined trajectory between now and 2037. These investments are consistent with the State’s goals and the Ports’ goals to prioritize investments in clean and alternative fueling infrastructure and in heavy-duty vehicles with alternative fuels and zero-emissions equivalency. [This bill] is a modest step in support of these efforts in light of the massive and unprecedented scale of investments which will be necessary to transform the freight sector in the near future. Under this program, short-term investments in hybrids and alternative fuels will be encouraged and protected if CARB determines that they will result in significant improvements in short-term environmental quality and they will not compromise the ultimate regulatory timetables for an orderly transition to future zero-emissions.”

In opposition, Sierra Club California writes, “California set a goal of reducing emissions from port operations by requiring 100% of cargo handling equipment be zero-emission by 2037. [This bill] would extend the life of aging polluting equipment, thereby allowing air pollution to continue beyond this target and undermining efforts to scale and adopt zero emission alternatives. [We] generally support efforts to reduce air pollution and the rapid transition to renewable energy alternatives in order to respond to the climate crisis and reduce GHG emissions. However, to meet our air quality and climate goals, California must prioritize zero-emission technologies, not incentivize short term measures that prolong reliance on fossil fuels and continue to contribute to air quality pollution.”

Committee comments: Ports transition to zero-emission facilities has been complicated by the difficulty of providing enough electricity to power port equipment and ships. This bill proposes to address that challenge by providing a useful life reassurance on new cargo handling equipment that would cumulatively decrease emissions over the regulatory baseline. As an alternative to the bill, CARB could consider incorporating useful life provisions into the future zero-emission cargo handling regulation.

The useful life of cargo handling equipment can be up to 22 years, so this bill will likely result in front loading the purchases of ‘not quite zero’ emission cargo equipment that would then be in service for up to 22 years.

With the next cargo handling equipment amendment looming on the horizon, this bill may pose a complicated endeavor for only a short-term window of opportunity. This bill would require additional staff and workload for CARB to develop the methodologies for the guidelines. It is possible that by the time CARB establishes guidelines, there will be a zero-emission cargo handling regulation in development and soon to be implemented.

In addition, this bill could have secondary impacts on ports’ efforts to upgrade their infrastructure in preparation for cleaner technologies. Specifically, because hybrid technologies allow for equipment to partially continue to operate as it always has, these technologies may not necessitate ports to completely upgrade their infrastructure in preparation for mostly electric and/ or hydrogen equipment. Allowing for “transitional technologies” to operate at the ports could delay necessary utility upgrades and delay ports’ transition to zero-emission technologies.

This bill would exempt the establishment of guidelines from the rulemaking requirements of the APA. CARB’s two part board meeting process, in which the board hears an item at a preliminary meeting and votes on the item at a later meeting, allows time for public input and stakeholder feedback.

Double referral: This bill is double referred to the Assembly Natural Resources Committee and will be heard by that Committee as it relates to issues under its jurisdiction.

SB 1 (Beall) Chapter 5, Statutes of 2017, in addition to increasing taxes and fees to raise $50 billion over ten years in new transportation revenues, provides owners of commercial motor vehicles certainty about the useful life of engines certified by CARB and other applicable agencies to meet required environmental standards for sale in the state.

REGISTERED SUPPORT / OPPOSITION:

Support

Pacific Merchant Shipping Association (sponsor)

Elders Climate Action, NorCal Chapter

Elders Climate Action, SoCal Chapter

Opposition

Sierra Club California

Analysis Prepared by: Christine Casey / TRANS. / (916) 319-2093

1. CARB. Freight & Goods Movement. Cargo Handling Equipment Information. https://ww2.arb.ca.gov/resources/documents/cargo-handling-equipment-regulation-transition-zero-emissions. Accessed April 10, 2023. ↑