The California Air Resources Board is proposing to regulate off-road diesel construction equipment and will be voting on the proposal May 24–25 in San Diego.
The proposed NOx regulation requires that each year, 10 percent of the fleet horsepower be re-powered, replaced or retired. Another 20 percent of the fleet will be retrofitted annually with CARB Verified Diesel Emission Control Systems to reduce PM emissions. CARB estimates the state construction fleet at 164,000 units.
We believe this rule represents bad public policy, particularly in its impact on women- and minority-owned businesses. It will drive up the cost of construction and result in the loss of thousands of jobs as companies are forced to pare down their fleets or go out of business due to intense capital requirements. The following represents our positions:
The construction industry supports efforts to clean the emissions from our equipment, but the solution must be technologically feasible and economically possible. The technological solution resides with equipment makers, not equipment owners.Under the proposed rule, every single piece of construction equipment in the state must be re-powered, replaced, retired and/or retrofitted to meet the requirements. It will cost the industry $21 billion over the next 12 years to replace all 164,000 engines — and in most cases engine replacement is not possible, so expensive new equipment will have to be purchased to achieve the goals, driving costs even higher.CARB says "Charge your customers more to pay for it." This will drive up the cost of construction on every house, office building, hospital, and highway.A large share of the 25 percent of companies engaged in public works construction will go out of business because they will not be able to afford this regulation. They can't charge their customers more because every job is competitively bid. Hardest hit will be women-owned and minority contractors who have smaller capital reserves. The loss of these companies will have big impacts on public projects.Construction industry cash flow will drop to zero during this period as they pour everything they have into acquiring new equipment, which runs from $92,000 for a backhoe to $3.5 million for a crane.It will cause the loss of 28,000 to 39,000 jobs based on CARB's estimated costs of $3.7 billion. If the industry's cost figures are used, the job loses will be much, much higher as equipment is "retired." Job loss will primarily affect the highly skilled equipment operators, but other jobs will go as well, including mechanics, internal staff and among our suppliers.The construction equipment manufacturers cannot meet the demand to replace 164,000 pieces of equipment in 12 years. Manufacturers are already 18 months to two years behind in meeting current demand. Over the last decade, they have shipped an average of 7,000 new units in the state each year. At that pace, it will take 23.5 years to replace the fleet.The manufacturers of diesel emission control systems cannot meet the demand to retrofit the California fleet. Only two are verified by CARB and they have no distribution chain in the state. These devices generally must be engineered to each application, and there are no technicians available who could install them.The recordkeeping and reporting requirements alone will cost the industry $65.6 million every year, based on CARB's estimate of cost from the Portable Engine Registration Program of $400 per engine.