BOARD MEETING DATE: April 3, 2009
AGENDA NO. 30
(Continued from March 6, 2009 Board Meeting)

PROPOSAL:

Approve and Adopt Technology Advancement Office Clean Fuels Program Annual Report and Plan Update

SYNOPSIS:

As a requirement of the Clean Fuels Program funding, the Technology Advancement Office must submit to the Legislative Analyst by March 31^st of each year an approved Annual Report for the past year and a Plan Update for the current calendar year. Staff presented the 2009 Clean Fuels Program Draft Plan Update to the Board for review and comment at its October 3, 2008 meeting. Adoption of these documents was postponed one month to allow time to evaluate the impact of the Stimulus Bill on potential projects in the Plan Update and investigate leveraging opportunities with federal agencies. At this time, staff is re-submitting the Technology Advancement Clean Fuels Program Annual Report and Plan Update for Board approval.

COMMITTEE:

Technology, February 20, 2009 and March 20, 2009, Recommended for Approval

RECOMMENDED ACTIONS:

1. Adopt the attached Technology Advancement Office Clean Fuels Program Plan Update for 2009 and include it in the AQMD’s Clean Fuels Program;
2. Approve the attached Technology Advancement Office Annual Report for 2008; and
3. Approve the attached Resolution finding that the update of the Technology Advancement Office Clean Fuels Program Plan and its proposed projects do not duplicate any past or present programs of specified organizations.
    

Barry R. Wallerstein, D.Env.
Executive Officer

Background

Achieving federal and state clean air standards in Southern California will require emission reductions from both mobile and stationary sources beyond those available from current technologies. The 2007 Air Quality Management Plan (AQMP) relies on the expedited, future implementation of cleaner mobile and stationary advanced technologies in Southern California to achieve these standards. To meet these needs and accelerate commercialization of progressively lower-emitting vehicles and advanced technologies that are not yet fully developed, the AQMD initiated a Clean Fuels Program in 1988 and established the Technology Advancement Office (TAO) to administer the Program. Concurrently, the State Legislature authorized funds for the AQMD’s Clean Fuels Program through SB 2997 and subsequently renewed this funding authorization through SB 316 in 1993. On June 8, 1999, SB 98 extended the Clean Fuels Program funding mechanism until January 1, 2005, added administrative requirements and specified the creation of and expectations for the Clean Fuels Advisory Group. On September 22, 2003, SB 288 was signed into State Law and extended the Clean Fuels Program funding mechanism until January 1, 2010. In 2008, SB 1646 reauthorized these funding mechanisms, removed the funding sunset of January 1, 2010 and reinstated the five percent administrative cap.

The AQMD Clean Fuels Program is implemented as a public-private partnership in conjunction with private industry, technology developers, academic institutions, research institutions and government agencies. This public-private partnership has enabled the AQMD to historically leverage public funds with outside investment in a ratio of more than $3 of outside funding to every dollar of AQMD funding.

Health and Safety Code (H&SC) Section 40448.5.1 requires that the AQMD adopt a plan that describes the expected cost and benefits of proposed projects prior to any Clean Fuels Program expenditure after January 1, 1996, and find that the proposed projects do not duplicate programs of other organizations specified in the H&SC provision. The Board initially adopted such a plan at its March 8, 1996 meeting. SB 98 amended this provision by requiring annual updates to this Plan and 30-day public notice to specified interested parties and the public prior to the annual public hearing at which the Board takes action on the Clean Fuels Program.

SB 98 also requires the preparation of an annual report with specified contents. This annual report requires the review and approval by an advisory group and the Board, prior to submittal to specified offices of the Legislature by March 31^st of each year. This legislation also specifies the make-up of the advisory group and its primary responsibilities to make recommendations regarding the most cost-effective projects that advance and implement clean fuels technology and improve public health. The membership of the advisory group was previously approved by the Board on September 10, 1999. Changes to the composition are reviewed by the Board’s Technology Committee and submitted to the Board for approval on an as-needed basis.
 

Proposal

This package includes an adoption resolution (Attachment A) and one combined document, the TAO Clean Fuels Program Annual Report and Plan Update (Attachment B), for the Board’s consideration. The first portion of the document is the Draft TAO Clean Fuels Program Annual Report (Annual Report) for 2008 and the second portion is the Draft TAO Clean Fuels Program Plan Update (Plan Update) for 2009. As part of the Board’s consideration of the Plan Update, the Board must make a finding that the update to the TAO Clean Fuels Program Plan and its proposed projects do not duplicate any past or present programs of specified organizations. An adoption resolution is provided in Attachment A making such a finding.
 

Clean Fuels Program Annual Report 2008

The Annual Report covers projects and progress of the Program for Calendar Year (CY) 2008. As discussed earlier, this report addresses all of the requirements specified in H&SC 40448.5.1(d). Specifically, the report includes the following required elements:

• A description of the core technologies that the AQMD considers critical to ensure attainment and maintenance of ambient air quality standards and a description of the efforts made to overcome commercialization barriers;
• An analysis of the impact of the AQMD’s Clean Fuels Program on the private sector and on research, development and commercialization efforts by major automobile and energy firms, as determined by the AQMD;
• A description of projects funded by the AQMD, including a list of recipients, subcontractors, co-funders, matching state or federal funds and expected and actual results of each project advancing and implementing clean fuels technology and improving public health;
• The title and purpose of all projects undertaken pursuant to the Clean Fuels Program, the names of the contractors and subcontractors involved in each project and the amount of money expended for each project;
• A summary of the progress made toward the goals of the Clean Fuels Program; and
• Funding priorities identified for the next year and relevant audit information for previous, current and future years covered by the report.

During CY 2008, the Clean Fuels Program executed 72 new projects or studies and modified 6 continuing contracts adding additional dollars to sponsor research, development, demonstration and deployment projects of alternative fuel and clean fuel technologies. The AQMD’s contribution to these projects was more than $11.3 million, with total project costs of nearly $57.4 million from other governmental agencies, private sector, academia and research institutions. These projects address a wide range of air quality issues with a diverse mix of advanced technologies. Figure 1 shows the distribution of funding committed from the Clean Fuels Program through executed agreements in 2008. It should be noted that the executed agreements typically lag the Governing Board awards due to the time necessary to negotiate contracts. During this phase, project awards may be reduced in scope, encounter delays in execution, or may not be contracted at all due to unforeseen difficulties following Board approval. As such, the funding distribution represents a “snapshot-in-time” of the Clean Fuels Program for the calendar year.

Figure 1: Distribution of Clean Fuels Program Funds
in CY 2008 (Total: $11.3 Million)

During CY 2008, the AQMD supported a variety of projects and technologies, ranging from near-term to longer-term research, development, demonstration and deployment activities. This “technology portfolio” strategy provides the AQMD the ability and flexibility to leverage state and federal funding while also addressing the specific needs of the South Coast Air Basin. Projects in CY 2008 included continued expansion of natural gas infrastructure, development of heavy-duty natural gas engines, conversion of hybrid electric vehicle technologies and the demonstration of on-road emissions controls and retrofit devices for off-road construction equipment. The AQMD also executed two studies to evaluate emissions impacts of ethanol and biofuel blends and one health impacts study to participate in the broader National Children’s Study.

In addition to the new projects, 18 research, development and demonstration projects, 19 technology assessment projects or studies and 2 incentive projects were completed in CY 2008. Summaries for each of the technical projects are provided in Appendix C of the Annual Report.

As required, this annual report has been reviewed and approved by the SB 98 Clean Fuels Advisory Group and is due to the state by March 31, 2009.
 

Clean Fuels Program Plan Update 2009

The Draft Clean Fuels Program Plan Update was presented for Board consideration on October 3, 2008. At that time, the Draft Plan Update was approved with Board direction to include potential compressed air technologies and several other clarifications. The attached Draft Plan Update incorporates those changes and is presented here for approval to include in the submittal to the State Legislature.

The attached Plan Update for the Clean Fuels Program identifies potential projects to be considered for funding during 2009. The proposed projects reflect promising low- and near zero- or zero-emission technologies and applications that are emerging in the different source categories. This Plan Update includes a number of proposed projects, not all of which are expected to be funded in the current calendar year given the available budget. Projects not funded in 2009 may be considered for funding in future years.

In addition to identifying proposed projects to be considered for funding, this Plan Update confirms nine key technical areas of highest priority to the AQMD. These high priority areas are listed below based on the proposed funding distribution shown in Figure 2:

• Electric and Hybrid Vehicle Technologies
• Engine Technologies
• Emission Control Technologies
• Infrastructure and Deployment (compressed and liquid natural gas)
• Hydrogen infrastructure and Mobile Fuel Cell Technologies
• Fuels and Emission Studies
• Stationary Clean Fuels Technologies (including renewables)
• Health Impacts Studies
• Outreach and Technology Transfer

It should be noted that these priorities represent the areas where AQMD funding is thought to have the greatest impact. In keeping with the diverse and flexible “technology portfolio” approach, however, these priorities may shift during the year to (1) capture opportunities such as cost-sharing by the state government, the federal government or other entities or (2) address specific technology issues which affect residents within the AQMD.

Figure 2 graphically depicts the potential distribution of AQMD Clean Fuels funds, based on projected program costs of nearly $16.6 million for the nine project areas discussed above. The expected actual project expenditures for 2009 will be much less than the total projected program cost since not all projects will materialize. The target allocations are based on balancing technology priorities, technical challenges and opportunities discussed previously and near-term versus long-term benefits with the constraints on available AQMD funding. Specific contract awards throughout 2009 will be based on this proposed allocation, the quality of proposals received and evaluation of projects against standardized criteria and, ultimately, the Board’s approval. At that time, additional details will be provided about the technology, its application, the specific scope of work, the project team capabilities and the project cost-sharing.

These technical priorities will necessarily be balanced by funding availability and the availability of qualified projects. Revenues from several sources support the AQMD’s Technology Advancement program. The principal revenue source is the Clean Fuels Program, which, under H&SC Section 40448.5 and Vehicle Code Section 9250.11, establishes mechanisms to collect revenues from mobile and stationary sources to support the program’s objectives, albeit with constraints on the use of the funds. Grants and cost-sharing revenue contracts from various government agencies, such as the California Air Resources Board, the California Energy Commission, the National Renewable Energy Laboratory and the United States Department of Energy, also support technology advancement efforts.

Figure 2: Projected Cost Distribution
for Potential Projects in 2009 ($16.6 million)

The proposed Plan Update is the result of a comprehensive planning and review process. This process has included consideration of the 2007 AQMP control measures and coordination activities involving outside organizations. As part of this process, staff hosted two one-day retreats in August 2008 and February 2009 to solicit input from the Clean Fuels Advisory Group, the Technical Advancement Advisory Group and other technical experts. During these retreats, the participants reviewed the current Technology Advancement projects and discussed near-term and long-term technologies as potential projects. These discussions, where appropriate, were fashioned into project areas and included in this year’s Plan Update. Additionally, staff presented the 2009 Clean Fuels Program Draft Plan Update to the Technology Committee on September 19, 2008, and to the full AQMD Board for review and comment at its October 3, 2008 meeting.

In addition, staff has continued the day-long technology and roundtable forums to help guide the overall research, development, demonstration and deployment strategy for the Plan Update as well as solicit input and feedback on general agency strategies toward meeting overall AQMP goals. A total of 18 technology and roundtable forums have been conducted from 2006 through 2008. To the extent possible, staff has incorporated the project ideas, directions and strategies into the Plan Update from these technology and roundtable forums.

Based on communications with the organizations specified in H&SC Section 40448.5.1 and review of their programs, the projects proposed in this Plan Update do not appear to duplicate any past or present projects. As each individual project is recommended to the Board for funding, staff will continue to coordinate with these organizations to ensure that duplication is avoided and ensure optimal expenditure of Clean Fuels Program funds.

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (Stimulus Bill) to address the historic national financial crisis. Staff analysis of the Stimulus Bill has indicated large funding opportunities for many technology areas contained within the Clean Fuels Program, most notably electric drive, diesel emission reduction, hydrogen and fuel cell technologies. Staff has been conducting analyses of funding areas and meeting with different federal agency staff to identify stimulus funding opportunities to complement existing Governing Board policies and initiatives related to research, development, demonstration and deployment. As a result of this new development, staff requested at the February 20, 2009 Technology Committee meeting that the 2008 Annual Report and 2009 Plan Update be continued until the April 3, 2009 Governing Board meeting to allow further time to identify these leveraging opportunities and discuss further with the affected federal agencies.

At the February 20, 2009 Technology Committee meeting, staff presented an initial description of potential projects under the various funding areas described in the Stimulus Bill. Although the Plan Update already reflects these project areas and these federal activities remain extremely fluid, language about the Stimulus Bill and its potential impact have been included in the Plan Update for 2009 to highlight the economic environment, reflect AQMD’s Clean Fuels Program overall goals for 2009 and identify areas of potential leveraging.
 

Attachments (EXE, 2.65m)

1. Resolution
2. TAO Clean Fuels Program 2008 Annual Report and 2009 Plan Update