Ports Initiative & MSTRS

West Coast Collaborative

March 2015

National Ports Initiative Areas of Focus

Regulatory Development and

Enforcement

Remove Barriers to Technology

Development and Application

Data: Emissions Inventories, Tools & Metrics

Create a Bridge to EPA/Federal

Partners

Develop Strategies for Community­Port Engagement

2

Mobile Source Technical Review Subcommittee

MSTRS Port Work Group

~ Advice on actions to improve air quality at ports ~ Define a "port" for the purpose of work group ~ Improving metrics and inventories ~ Determining barriers to technology deployment and how to remove ~ Suggesting ways for us to improve federal coordination ~ Working with us to strengthen port-community relations ~ Next Meeting - May 2015

EPA Supporting Efforts ~ Conducting an assessment of port emissions and strategies to reduce

("macro") ~ Developing community engagement materials.

3

MSTRS Ports Workgroup

MAERSK LINE/ Maersk Agency USA U.S. EPA Port of Long Beach Port of New Orleans Maryland Port Administration Virginia Port Authority Port of Charleston American Association of Port Authorities

Ports America

Cargill Target Walmart Caterpillar

Manufacturers of Emission Controls Association Burlington Northern Santa Fe Corporation Environmental Defense Fund Evans Delivery New Jersey Dept of Environmental Protection South Carolina Dept of Health & Environ Control Natural Resources Defense Council Greater Southeast Development Corporation East Yard Communities for Environmental Justice Steps Coalition International Council on Clean Transportation Fond du lac Environmental Air Program

·ulfl~ .• .. Mil¥' ... A ' . .. . ... ... .

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Macro Assessment Update Objective

~ Update our national understanding of future port-related emissions for criteria, air toxics, and climate pollutants

~ Assess the effectiveness of technological and operational emission reduction strategies across ports with different emissions profiles

~ Inform national policy discussion for voluntary port initiatives

Status ~ Draft baseline inventories (2011) and emission reduction strategies

complete ~ Conducting Macro Assessment Webinars for Ports Work Group

• Baseline inventories complete • Control strategies

.. " ... . -uttn- .... . n ""' .,..- n

' ·• •• :. . IF""" I

s

Macro Assessment Update

~ Revisions to Macro Assessment workplan based on Internal & external discussions

~ We will report tons of emission reductions from emission control strategies and dollar health benefits of these results

• The dollar health benefits estimates will use the same methodology we use for the DERA Report to Congress

• Due to potential for misinterpretation of results and resource constraints, we have decided not to conduct an air quality concentration assessment

- Case for action can be made without pollutant concentration assessment

~ Ports of LA/LB represent unique case due to regulatory implications of their inventories and control strategies

• Macro Assessment will not analyze LAILB, however, we will include ARB approved results as a short case study

6

Capacity Building for Near Port Communities

In conjunction with EPA's Office of Environmental Justice & EPA Regions develop strategies for successful community-port engagement:

~ Identify models of effective community-port-government engagement

~ Identify data that port communities need to quantify environmental/health impacts

~ Facilitate Understanding of Community/Port concerns

~ Citizen-based Evaluation and Assessment Projects (data)

~ Possible Pilot funding

7

Community Engagement: Priority Areas

Creating a Bridge to Federal Partners

~ Increase Federal Partners consideration of the air quality impacts of their actions

~ Encourage early community involvement on federal projects.

~ Build a regional based community resource list with contacts for Federal agencies

8

FY2014 Status- $20M for DERA

~ $9M for National Regional Competitive RFP ~ 22 awards were made ( -$400K on average)

~ $1M for Tribal Competitive RFP ~ First year for separate tribal RFP

• Awarding three Tribal grants

~ -$4M State Program Grants ~ New, stricter requirements for State Program Grants (follow

National RFP requirements)

~ -$5M Ports RFP (four grants will be awarded)

~ -$3M School Bus Rebates* ~ 76 rebates funding 210 buses in 30 States

* Includes carryover funding from closed grants

9

FY2015 Status - $30M for DERA Approximate amounts for program

~ -$16M for National Regional Competitive R

~ -$1M for Tribal Competitive RFP ~ second year for separate tribal RFP

~ -$9M State Program Grants ~ New, stricter requirements for State Program Grants (follow

National RFP requirements)

~ -$4M School Bus Rebates

10

MAR POL Annex VI Emission Control Areas

Sulfur Standards and Enforcement

ronmental Protection Agency Air Enforcement Division

Emission Control Areas (ECA)

• North American ECA • Adopted by IMO: March 26,2010 • Entry-into-force: August 1, 2011 • Enforcement: August 1, 2012 (Reg.

14.7)

• U.S. Caribbean Sea ECA • Adopted by IMO: July 15, 2011 • Entry-into-force: January 1, 2013 • Enforcement: January 1, 2014 (Reg.

14.7) --- ' l ', D1L .t1 't. y I .. u. .... ~--~ ...

I~ ~-dl-

2

ECA Requirements ... Why? • Purpose is to reduce emissions and improve public health in the North

American and U.S. Caribbean Sea ECAs. This is a health-based initiative that will have positive long-term impacts on port environments and the communities who live and work in those and adjacent areas.

• Most dramatic improvements occur in port communities, but even areas far from ports see benefits. • By 2030, nitrogen oxides (NOx): 1.2 million tons • Sulfur oxides (SOx): 1.3 million • Particulate matter (PM) 143,000 tons, respectively

• Annually, by 2030 these reductions are estimated to prevent between 12,000 and 31,000 PM-related premature deaths; 1,400,000 work days lost; and 9,600,000 minor restricted activity days.

3

Change in Annual Average PM2.5

< = 0.01 ug/ m3

> 0.05 to <= 0.10

- >2.0 to 4.0 2020 200n m ECA vs 2020 base case

Fuel Oil Requirements

Annex VI, Reg. 14 and 18: SOK and PM Emissions & Fuel Oil Availability and Quality

Shipboard Requirements

• Fuel Oil: ECA SuHur Content Cap •Sulfur Content Caps •Fuel Quality Standards

Effective Date

July 1, 2010

January 1, 2015

Sulfur Limit %mlm (ppm)

1.00% (10,000)

• Operations: •Bunker Delivery Notes & Samples •Fuel Oil Change-Over Procedures •Fuel Oil Change-Over Logbook Entries

0.10% (1,000)

Global SuHur Content Cap

January 1, 2012

January 1, 2020

3.50% (35,000)

0.50% (5,000)

5

Annnex VI- Domestic lmplementaion

• U.S. domestic law implementing Annex VI- authorizes enforcement by two separate U.S. government agencies.

• Coast Guard has the lead on vessel inspections.

• EPA has the lead on shoreside fuel supplier inspections, and on violations that are referred to EPA by the Coast Guard for enforcement.

USCG Referral to EPA

• Factors the USCG will use when determining whether to refer a matter to the EPA include:

• Repeat offenders

• Evidence obtained from a case involving EPA fuel-sampling or other assistance

• Serious noncompliance, e.g., entering the ECA without compliant fuel on board

• EPA Role

Joint Agency Annex VI Implementation

• Shore-side fuel supplier compliance

• Provide USCG with expert assistance on vessel fuel sampling

• Fuel Non-Availability Reports • Civil penalty enforcement • Assistance in criminal

investigations

EPA Enforcement

• EPA may adjudicate civil penalties for

• EPA enforcement is particularly targeting: • Shoreside fuel supplier violations • Ships detained by Coast Guard for substandard MARPOL

Annex VI compliance • Ships that consistently fail to get LSFO or do not make best

efforts to get LSFO (fuel nonavailability issues- FONARs)

EPA Penalty Policy

• Domestic legislation requires penalties be calculated taking into account 11the nature, circumstances, extent, and gravity of the prohibited acts committed and, with respect to the violator, the degree of culpability, any history of prior offenses, ability to pay, and other matters as justice may require."

• Civil penalty capped at $25,000 per day, per violation (will be adjusted for inflation).

EPA Penalty Policy: Released Jan 16, 2015

• Two main goals: • (1} Deterrence

• (2} Level Playing Field

• Main components of a civil penalty calculation: • (1} Economic Benefit

• (2} Gravity

• (3} Other adjustments- to achieve fair and equitable penalty

EPA Penalty Policy

• Economic Benefit= avoided cost of purchasing compliant fuel. • Differential in price between non-compliant fuel and compliant fuel.

• How much non-compliant fuel did the vessel burn and over how many days?

• Obtain information thru direct reporting or estimation. Underlying calculations depend on ship speed, distance traveled, assumed engine load, etc.

EPA Penalty Policy

• Gravity- an amount to reflect the seriousness of the violation in terms of environmental harm.

• Penalty per ton of non-compliant fuel used based on sulfur level.

• Record keeping Violations- ships burning non-compliant fuel may also be in violation of other requirements of MARPOL Annex VI.

• Failure to maintain appropriate written procedure showing how fuel change-over is to be done.

EPA Penalty Policy

• Record keeping Violations can't-• Failure to record volume of low sulfur fuel oil in each tank, as well as the date, time, and

position of the ship when any fuel oil change over operation is completed prior to the entry into (or exit from} the ECA.

• Failure to maintain bunker deliver notes or MARPOL sample.

• Adjustments to penalty- degree of willfulness, negligence, cooperation, history of noncompliance, litigation risk, ability to pay, performance of supplemental environmental projects.

EPA Enforcement

• EPA will attempt to cooperatively settle civil penalty actions with violators.

• If settlement fails or there is insufficient/no cooperation, EPA will file a administrative complaint (there is no judicial action for the initial penalty under our domestic law).

• Default judgment to be collected against LOU.

• If no LOU, EPA has the option to pursue in rem action against the vessel.

Fuel Oil Nonavailability

• A vessel is expected to use compUant fuel when operating in the ECAs.

If a1 ship owner is not a1ble to obtai1n compliant fuel because it is not avaUa,b~e, a Fuel au Non-Availability Report (FO,NAR) must be, subm1itted.

• A FONAR is not a1 waiver! It is a forma~ statement of nonco~m~ pliance.

• lf 0.10% {1,000 ppm) is not avaiiJable, anclither ECA-compliant fuel must be used if it i1s availaJ b~e.

• ECA-compliant fuel! wUirnat be deem1ed "unavailable" for the purpo,ses~ of a FONJAR if another compliant fuel is available, for e~amplle a low sutfur marine disti1Uate ~MG01/MDO) below 1,000 ppm!).

16

Voyage Planning and Due Diligence

• Assuring compliance with the ECA begins when voyage planning is initiated.

• Can the vessel comply with the ECA with fuel currently on board?

• If not, can the vessel take on fuel at an intermediate port?

• If not, a should the trip be assigned/contracted to a different vessel that can comply?

• Then, voyage plan should be established.

• Expectation: • Voyage plan will reflect measures taken by ship owner

and operator to assure entry into ECA with compliant fuel.

ECA Exemptions & Equivalencies

• USCG works with EPA in considering exemptions (Reg 3) and equivalencies (Reg 4).

• The Coast Guard, in consultation with EPA, is responsible for issuing exemptions or equivalencies for U.S. flagged vessels.

• Foreign ships must follow their flag administration exemption or equivalency process.

• EPA and USCG review foreign ship proposals to consider acceptability to U.S. government.

• USCG verifies compliance with method approved and documented in the lAPP to achieve equivalent emissions reductions.

Annex VI Resources

• Coast Guard Homeport: www.Homeport.USCG.mil Select the following links: Missions > Domestic Vessels > Domestic Vessel General> MARPOL ANNEX VI

• CG-543 Policy Letter 09-01 (Annex VII mplementation) • CG-CVC Polley Letter 12-04 {ECA Compliance) • CG-CVC Policy Letter 13-02 (IEE/SEEMP)

• EPA MAR POL Annex VI http://www2.epa.gov /enforcement/marpol-annex-vi

• EPA Ocean Going Vessels Air Emissions Web Page: http://www.epa.gov /otaq/oceanvessels. htm

Tom Brotherton CALSTART

West Coast Collaborative March 31 2015

2

AGENDA

• Fuel Prices

• Natural Gas Vehicles

• Electric Vehicles

• Incentives

•

•

•

•

Fuel Prices Diesel price dipped below CNG, now back up

Low prices: current stress and strain on NG production

Oil price slump driven by Saudi Arabia short-term geopolitical strategy

Oil prices heading back up

30 History

20

H nry Hub natural gas spo price

10

2012 Projections

Oil-to-gas pr1ce ra o

0 0 = 3-2

2018 = 3.

O r-----r-----..,.--11---;--------r----------.

1990 2000 2010 2020 2030 2040

Source: Comparison of spot prices for Brent crude oil and Henry Hub natural gas, 1990-2040: History: U.S. Energy Information Administration, Monthly Energy Review September 2013, DOE/EIA-0035 (2013/09) (Washington, DC, September 2013). Projections: AE02014 National Energy Modeling System, run REF2014.D102413A.

3

Fuel Price Volatility

$ 160

$140

$ 120

$100

$80

$60

$010

$20

$0

• Oil prices more volatile than natural gas

Crude Oil w. Nature1 Gas (BTU EQulvelence)

Natural Cas (Energy Equivalani Price)"

"' .#' ~ .#"' .#" " ,._# +~ ~"""" -6' ....... ikNrs• HVMIX. ·~ OiotNt~ ~~rS.:.»ur eTl/ 8qUM~ •• I'!Clle .. c; .......... ., '"""""'!My .. ~,_ gw.IIWQI!J., ...... ...... q: ...... ~ ~ ...... .. .,.. '-11'111f' ..... r-.... .,..~

Figure 1. Historical crude oil front month futures prices

dollars per barrel 120

11 0 -;:;;::J;;L.,...,..~::;::;:-:;r'V;;;?---....-~.:::;~;:;:;;;;:-

80 -

70 -

60

50 -

40.------.-----,.-----.------.------.------.----Jan-14 Mar-1 4 May-1 4 Jul-14 Sep-1 4 Nov-1 4 Jan-1 5

- WTI crude oil - Brent crude oil

~ Bloomberg

Figure 13. Historical front month U.S. natural gas prices

dollars per MMBtu 7.00 -

4.00

3.00 -

2.00 .------.-----,.------.--------.------.-------.----Jan-14 Mar-14 May-1 4 Jul-14 Sep-14 Nov-1 4 Jan-1 5

- Henry Hub futures price

~ Bloomberg

4

Natural Gas Pump Price Low Price Volatility

Natural Gas @ $4.00 per MCF Natural Gas@ $8.00 per MCF

urU.:.... ~· 11~1!011 1 ~ Natural Gas (divide by 8) $0.50 Natural Gas (divide 8) $1.00

Transport Costs & Fees $0.20 Transport Costs & Fees $0.20

Electricity Costs per GGE $0.10 Electnc1ty Costs per GGE $0.10

Maintenance per GGE $0.20 Maintenance per GGE $0.20

Federal and State Taxes $0.25 Federal and State Taxes $0.25

Fuel Card Fees per GGE $0.05 Fuel Card Fees per GGE $0.05

Retailer Profit Margin $0.40 Retai ler Prof it Margin $0.40

CNG at the Pump $1.70 CNG at the Pump $2.20

A doubling of the price of natural gas increases prices at the pump only $0.50

perGGE

5

NGV Road map: Key Findings

• Market for heavy-duty natural gas trucks in So Cal Gas territory expected to grow SX by 2020 and up to lSX by 2030, possibly reaching 115,000 trucks by 2030- recent release of 11.9L NG engine is a key enabler

• Regional/local delivery and line haul are forecasted to be the key growth markets

• Natural gas will have a majority market share in transit and refuse applications in So Cal

• Refuse trucks: opportunity to use landfill gas to fuel trucks: 11Ciose the loop"

6

E-trucks: Distance Ranges from Ports .-_,....,.

20 mi from port

15 mi from port

•

...

.~ .,

• •• . " -

7

Technology Option 1 Range Extended Electric Vehicle (REEV)

The "Chevy Volt of Trucks"

• Electric drive with engine backup- Natural Gas, Diesel, Turbine

• ZE much of the time; very low emissions otherwise

• CA funded demo projects

8

Technology Option 2 Battery EV (BEV)

• Zero Emissions all the time

- Only battery power; no engine

- "'100 mile range per charge

• Some Smaller BEV Trucks are Available Right Now

The 11Nissan Leaf of Trucks"

9

Tyrano " 1-'e wo1 1 js 1st Hydrogen Fuel Cell

power eli Class 8 Truck

FEATURES:

10

-

Incentives Available

• California HVIP:

- Funded at $10-lSM per year for electric, hybrid trucks and buses

• California Energy Commission: NGV Incentives

• California ARB:

-Upcoming development and deployment programs for ZE and near ZE pilot demonstrations

- Pushing both NOx and carbon reductions

11

12

California HVIP

Electric trucks and buses:

Hybrid trucks and buses:

ca I iforn ia hvi p.org

Base Vehicle Incentive GVWR (lbs) 1 to 100 vehicles 1 101 to 200

Outside ocz Within ocz vehicles

5.001 - 8,500 $20.000 $25.000 $12.000 8,501 -10,000 $25.000 $30.000 $18,000

10 001 -14 0003 $50,000 $55 000 $30 000 14,001 - 19,500 $80,000 $90,000 $35,000 19,501 - 26,000 $90 000 $100,000 $40.000 > 26,000 $95.000 $110,000 $45,000 1. Thofirstltueevouchels received I afteet,onciU51VOOf rOVIOUSNn ear are eh ollie for the by p Clngy s. g follo'Ni19oddibonol funding omovnt S2 .000/Ychic:lc If below U01lbs · S5 000/Yeh~lc if B. 501 lo 10,000 lbs· and SIO,OOO/Yehocleofovor10.0001bs 2- 'OC' re1erslo a dlsa.,.,ai'Uged eommurly 3. Th iS ,..,!folrangeos nollnl5'1dedforvehldos ulolwnga pod<.uptruclt chassiSiplatform typically found onvehodes below 10,0011bs GVWR. Vehidosat the lower end oftho10001 1o t 4,000 lbs welghttangewon be ...,aluatedon a eas~t>y.use basis to delerm!M elo!Jibffll lorlheMI Base Veh~ lncen1lve

Base Vehicle Incentive GVWR (lbs)' 1 to 100 vehlcles2 101 to 200

vehicles 6 ,001- 8,500 (plug-In hybrids only)' s 8,000 s 6 ,000 8 ,501 - 10,000 (plug-In hybrids only)' $10,000 $ 8.000

10.001- 19,500 $15,000 $10000 19,501 - 33.000 $20,000 $12,000 33,001 - 38,000 $25.000 $15,000 > 38 000 $30000 $20000

1 - Tracr.or trailers utolc::eGross CombinedVelude Welahl fe>rpurposes of de!<rmn Bu~Vehtd!lnc:e g ng rtlve 2- Thefirs1threeHVIPvauchers receiYedt>ya fteet, incluslveofprevoous funding years, areetogibleforthe followingadditicnalfundingemount 52,000/Yehldeofbelow 8,601 tbs S5.000/Yehlcleof8,6011o 19,5001bs, and 510 ooo. .. ehlcleof over 19 5001bs 3- Vehlde must beARIH:er'llfiedll$ an Ultra-lo...EmossoonVehide Voucher amountosinaeasedby S2,000 foreachoflhefollow!ng:ARIH:ertificationasaSuperUIIralowEmossoonVehoclean~iionfor

m o-ev aporall ve ernos Sl ons.

ARB Priorities Signaled by New Funds

• ARB/GGRF (Greenhouse Gas Reduction Funds)

• 4 tech categories- 2 imminent

- ZE Drayage Demos - up to $25M

• RFP EXECTED early March

- ZE Multi-Source Facility- up to $25M

• RFP EXPECTED early March -

- ZE Truck and Bus Pilots- up to $25M

• Late Spring 2015

-Other Unique Projects- TBD- up to $10M

• Spring 2015

Conclusion

• DON'T BE FOOLED BY NEAR TERM PRICES DROPS • it is likely not what the world will look like in 6-12 months • but do be aware of the full benefits of the tech and fuel

you are deploying or evaluating

• NEED TO KEEP OUR EVES ON THE LONG TERM TREND LINES

14