Tier Regulations Affecting Your Business in the Coming Years

1. Tier Regulations Affecting Your Business in the Coming Years Orlando, FL February 15, 2011

2. Topics to be Covered Today • Summary of Off-Road Engine Tiers • Why You Should Care What California Does • Update on the California Off-Road Diesel Rule • Tier 4 & the California Off-Road Diesel Rule • Other State/Local Rules & Projects Emphasizing Tier 4

3. Tier Regulations Affecting Your Business in the Coming Years Summary of Off-Road Engine Tiers

4. EPA Non-Road Emission Regulations Exhaust After Treatment Required

5. Engine Tiers

6. In-Use Off-Road Diesel Regulation Why You Should Care What California Does

7. Lead Time Requirement for California’s Off-Road Rule to Take Effect in Other States • Lead Time Requirement for California’s Off-Road Rule to Take Effect in Other States • California Adopts Rule • California Requests Federal Preemption Waiver • States Must go Through their Rule Adoption Process • The Rule Must be Identical to California’s • The State’s Rule Must Provide a Minimum Two-Year Lead Time After Adoption Note: States donot need to wait for the California Rule to receive a federal preemption waiver before adopting their own Rule. EPA and the courts have consistently taken the position that a non-California state may adopt California standards that have not received a preemption waiver but that the state cannot enforce the rules until the California preemption waiver is granted

8. Current Non-Attainment Areas

9. Counties Designated Non-Attainment or Maintenance

10. 2011+ Non-Attainment Projection

11. Where Each State Currently Stands

12. Where Each State Currently Stands

13. States Expressing an Interest in Adopting California’s Off-Road Rule - Connecticut - Delaware - Georgia - Illinois - Indiana - Kentucky - Maryland - Michigan - Missouri - New Jersey - New York - North Carolina - Ohio - Pennsylvania - Tennessee - Virginia - District of Columbia

14. Tier Regulations Affecting Your Business in the Coming Years Update on the California Off-Road Diesel Rule

15. CARB Off-Road Rule Background • First-of-Kind Rule Designed to Reduce Oxides of Nitrogen (NOX) and Particulate Matter (PM) from Self-Propelled, In-Use, Off-Road Equipment • Adopted by the California Air Resources Board (CARB) July 26, 2007 • Approved by the California Office of Administrative Law (OAL) May 16, 2008 • Became Effective June 15, 2008 • Amended December, 2008 • Second Amendment January, 2009 • Third Amendment July, 2009 • Fourth Amendment December, 2010

16. Rule Applicability • Commercial Off-Road Diesel Vehicles • 25 Horsepower and Greater • Includes Construction, Mining, Industrial, Airport Ground Support Equipment • Loaders • Dozers • Scrapers • Bobcats • Rough Terrain, All Terrain and Two Engine Cranes • Out-of-State Equipment that May Operate in California Must Also be Registered • New fleets entering California for the first time must meet the next Large Fleet average targets at the moment they initially enter the state.

17. Tier Progression Over Life of Regulation • Long-Term Compliance with Fleet Average Targets Depends Largely on Tier 4: NOx Requirements

18. Off-Road Rule History • Rulemaking Began in November, 2004 • PM - Only Rule • NOX Added to the Proposed Rule in 2006 • Rule Adopted July 26, 2007 • Rule Approved by California Office of Administrative Law (OAL) May 16, 2008 • Rule Became Effective June 15, 2008

19. Bring on the Amendments! • Rule Has Already Been Amended Four Times • December 2008 Amendment • Add Both Engines in 2-Engine Cranes to Off-Road Fleet • Previously Subject to Separate Regulations • Clarifying Language • January, 2009 Amendment • Extend Double Credit Deadline for Installing Verified Diesel Emission Control Strategy (VDECS) Retrofits • Additional Clarifying Language

20. Bring on the Amendments! • July, 2009 Amendment • Implement AB 8 2X Economic Relief • Reduced Activity Credit • Early Vehicle Retirement Credit • Reduce Turnover & Retrofit Requirements • December, 2010 Amendment • Delay Most Rule Requirements Until 2014 • Compliance actions required during calendar year 2013 • Eliminate All PM Emission Requirements of the Rule • Now a NOX Only Rule (Tighter Requirements 2017-2022) • If You Complied in 2010 You Get a Free Pass When the Rule Delay Ends (2014) • Increase Low-Use Threshold from 100 to 200 Hours Per Year

21. Bring on the Amendments! • New “Micro-Fleets” Category • 500 Horsepower or Less • Compliance Based on a Tier 2 Phase-in Schedule

22. Why All The Backsliding? • CARB Didn’t Get the Inventory Right • Unrelenting Pressure from Construction Industry • Estimated 195,872 Pieces of Equipment for 2009 • 132,000 Registered in 2009 • Fleet is Younger than Anticipated • Fuel Consumption Significantly Over-Estimated • Estimate was 1 Billion Gallons Per Year% • Actual Fuel Consumption ~ 200 Million Gallons Per Year • Load Factor Estimates Too High • Reduced by 33% • The Bottom Line • Emissions are Only 20% of the Original Estimates

23. Summary of Construction Industry Agreement with CARB on Off-Road Regulation • Announced During a Conference Call on October 7, 2010 • Adopted with December, 2010 Amendments • Negotiations Between AGC America, CIAQC and CARB to Avoid Litigation • Major Changes Announced • Delay First Compliance Date to 2014 for Large Fleets • 2017 for Medium Fleets • 2019 for Small Fleets • Extend Regulation Life to 2023 for Large & Medium Fleets • 2028 for Small Fleets • Maintain NOX Fleet Average & Minimum Turnover Requirements

24. Summary of Construction Industry Agreement with CARB on Off-Road Regulation • NOX BACT (Replace, Repower, Retire) • 4.8% in 2014 • 8.0% 2015-2017 • 10.0% 2018 Until Fleet Averages are Achieved • Remove All PM Requirements • Allow PM Retrofits (VDECS) to Offset NOX Requirements • Fleets that Met the Requirements in 2010 will be Deemed in Compliance for 2014 • Credits will be Retained for Contractors that Took Early Actions • Low Use Threshold Increased from 100 to 200 Hours Per Year • AGC will Drop Opposition to CARB’s Efforts to Receive a Waiver from US EPA to Regulate Off-Road Engines

25. Off-Road Requirements Currently Being Enforced • 5-Minute Idling Restriction • Initial Fleet Registration • Equipment Identification Numbers • Sales Disclosure Requirements

26. Regulatory & Project Reliance on Tier 4 Equipment Tier 4 & the California Off-Road Diesel Rule

27. CARB Rule Reliance on Tier 4 • Long-Term Compliance with Fleet Average Targets Depends Largely on Tier 4: NOx Requirements

28. CARB Rule Reliance on Tier 4 • Rule Exemptions are also based on Tier 4 • NOx Exemptions (Vehicle Replacement/Repower/Retire) include: • Vehicles less than 10 years old • Transition to Tier 4 began with model year 2008 • By 2022, only Tier 4 equipment will qualify for this exemption • Tier 4 Equipment (Interim & Final) is completely exempt from future turnover requirements in the Rule

29. Regulatory & Project Reliance on Tier 4 Equipment Other State/Local Rules & Projects Emphasizing Tier 4

30. Massachusetts DOT • Massachusetts • Revised Specifications for non-road diesel equipment on MassDOT job sites as of September 2, 2009 • Most current Tier applies to equipment greater than 50 hp • If not Tier 4, the equipment must retrofit with an EPA or CARB verified device • No “grandfathering” • If the emissions from diesel equipment comply with the most current EPA emission standards for particulate matter in effect at the time, but are superseded by newer Tier emission standards (i.e. Tier 3 emission standards replaced by Tier 4 emission standards), then the superseded diesel equipment will have to be retrofitted prior to the end of the contract with emission control technology

31. Virginia - Army Relocation of National Capitol Region Facilities to Fort Belvoir, VA • The following requirements were included in the bid specification: • All Contractor and sub-contractor diesel powered non-road construction equipment with engine horsepower (hp) ratings of 60 hp and above…shall be retrofitted with Emission Control Devices in order to reduce diesel emissions. The Retrofit Emission Control Devices shall consist of oxidation catalysts, or similar retrofit equipment control technology that (1) is included on the Environmental Protection Agency (EPA) Verified Retrofit Technology List and (2) is verified by EPA or certified by the manufacturer to provide a minimum emissions reduction of 20% PM10, 40% CO, and 50% HC • Tier 2, Tier 3 and Tier 4 Engines Exempt from this Requirement • No contractor will allow any diesel-fueled commercial motor vehicles or diesel non-road construction equipment to idle for a period greater than 5 minutes

32. Northeast Diesel Collaborative Model Contract Specification • Released in April, 2008 • Guidance for hospitals, universities, municipalities and transportation agencies • Until December 31, 2012, all diesel non-road construction equipment with engines 75 hp and greater on site more than 10 total days must have either (1) engines that meet EPA Tier 4 non-road emissions standards, or (2) emission control technology verified by EPA or CARB for use with non-road engines to reduce PM emissions by a minimum of 20% • Beginning January 1, 2013, all diesel non-road construction equipment on site for more than 10 total days must have either (1) engines meeting EPA Tier 4 non-road emission standards or (2) emission control technology verified by EPA or CARB for use with non-road engines to reduce PM emissions by a minimum of 85% for engines 75 hp and greater and by a minimum of 20% for engines between 25 and 75 hp

33. New York City Local Law 77 • Requires Best Available Technology (BAT) for construction equipment 50 hp or greater operated by agencies and contractors working within the city • BAT is technically feasible EPA or CARB verified devices, or Tier 4 engines • Ultra low sulfur diesel fuel (ULSD) is also required • BAT needs to be continuously updated to reflect introduction of new technology • Greater Tier 4 requirements as BAT over time

34. Pennsylvania DOT • Standard Special Provision for City of Philadelphia Federal-Aid Municipal (FAM) Projects • Released August 26, 2009 • Implements Philadelphia Executive Order 1-07, which requires the inclusion of clean diesel specifications in contracts for public works projects • Applies to projects estimated to be $1,000,000 or more • Applies to vehicles greater than 50 hp on the project in excess of 7 working days (consecutive or non-consecutive) • Requires use of retrofits or vehicles meeting Tier 4 emissions requirements

35. New Jersey Executive Order • Pilot Plan for reducing diesel emissions in publicly funded projects • Four projects per year for the next two years • After two years expand to all projects valued at greater than $5,000,000 • Requires engines meeting Tier 4 non-road emission standards or retrofit technology verified by EPA or CARB

36. Town of Becket, Massachusetts • Hydraulic Excavators Bid Specification Writing Guide • “The engine shall meet Interim Tier 4 emission requirements”

37. Thank You For Attending If you have any questions, please contact me: Mike Buckantz Associates Environmental 16882 Bolsa Chica Street, Suite 202 Huntington Beach, CA 92649 Office: (714) 916-4953 x 701 Mobile: (714) 625-7020 Fax: (714) 362-9085 mbuck@associatesenvironmental.com