VW Environmental Mitigation Trust:

Maximizing Emission Reduction

Benefits for Oregon and

Washington State

MAY 9, 2017

#MyOregon Photos

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Welcome!

Todays webinar is being recorded for later viewing reference.

A link to the presentation will be provided to everyone after today’s session

via email.

You can ask questions at any time via the online Q&A feature. We will

allow for at least a 20 minute Q&A at the end. Or you can contact us at

anytime after the session.

We appreciate your feedback. Please help us by taking a 3 minute survey

at the end.

Thank you for attending!

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Calendar of Upcoming Events

Making the Most of the VW Settlement: More Clean Air for the Dollar

May 18, 2017 2:00 pm PT – California

June 7, 2017 11:00 am ET – New York

June 7, 2017 2:00 pm ET – Florida

June 8, 2017 11:00am ET – Pennsylvania

June 8, 2017 2:00 pm ET – Texas

June 14, 2017 2:00 pm ET – Cost Effectivenessof Big Engine Replacements and How to Pursue Opportunities

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Our team for today’s webinar

Allen Schaeffer Executive Director

Kristen Gifford Director of Communications

Ezra Finkin Director of Policy & External Affairs

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Objectives for Today

Provide a brief overview of the VW Environmental Mitigation Trust and its process and help

answer some important questions:

What are the categories of eligible projects?

What are the largest sources of NOx emissions in the region?

What is the make up of commercial vehicles on the road in the region? Of these, which

are eligible for funding?

What are the benefits of upgrading larger equipment?

What are cost effective investment strategies to make the most of Trust revenues?

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Focus of our Webinar Today:

Opportunity for $2.9 Billion to Mitigate NOx Emissions through

Upgrading Heavy-Duty Vehicles & Equipment

Environmental Mitigation

Trust In Perspective

$2.9 Billion to be spent in as

little as 3 years for the sole

purpose of NOx reduction

Total DERA Funding 2008-

2013: $520 Million

• 73,000 engines, vehicles

& equipment

• 335,200 tons of NOx

reduced

$10 Billion - VehicleBuyback/LeaseTermination(Appendix A & B)

$2.9 Billion -Environmental Mitigation Trust (Appendix D)

$2.0 Billion - ZeroEmission PassengerVehicle Commitment(Appendix C)

Breakdown of the Components of the $14.9 Billion

VW Settlement

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The Process: Getting to the “Trust

Effective Date” is the First Milestone

First Major Milestone:

Trust Effective Date

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Applications For Funding Can Flow

After the “TED”

TED Assumptions

(A)May 2017: Funding Plans Submitted

by December 2017

(B) June 2017: Funding Plans Submitted

by January 2018

Trustee Requirements

Maintain a public website listing

projects funded, terms of the award

and anticipated NOx reduction

• 60 days after the TED, States must notify the

Trustee of their intention to be listed as a

beneficiary and announce a lead agency to

manage applications sent to the Trustee.

• 120 days after the TED, the Trustee will publish the

list of beneficiary states

• 90 days after being listed as a beneficiary, states

must submit to the Trustee a plan that outlines how

the state intends to spend Trust revenue. (7 months

from TED)

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Appendix D Represents an Historic Funding

Opportunity to Reduce NOx Emissions

Environmental Mitigation Trust

$113 Million

$73 Million

DERA Funding (2008 – 2013)

$15.6 Million

$18.6 Million

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Framework For

Decision-makingHOW TO SPEND THE FUNDS?

PROJECT SELECTION

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Framework for Environmental

Mitigation Trust Fund Decision-making

Identify the largest sources of NOx emissions

Identify the most cost-effectiveopportunity to reduce NOx emissions

Identify the opportunities that are available now and yield the near-termNOx reduction benefits

Identify the geographical locations of those source NOx emissions

Excess NOx emissions were generated by

VW non-compliant

vehicles.

The EMT is for mitigating those NOx emissions.

Maximize

NOx Emissions

Reductions

Now

More Clean

Air for the

Dollar

Collateral

Benefits in

Fuel Savings

and CO2

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Heavy-Duty Vehicles & Equipment Are

the Largest Sources of NOx Emissions

Where are the largest Sources of NOx Emission in PNW?

Heavy-Duty Applications

SOURCE: National Emissions Inventory Data (2014), U.S. EPA

NOx Emission (tons per year) OR WA

Electricity Generation and Fuel Combustion 18,689 28,331

Industrial 4,812 9,543

Wildfires 19,127 15,946

Other 13,478 16,568

Mobile Sources 94,342 188,543

Aircraft 1,550 3,414

Heavy-Duty Vehicles & Equipment 49,264 113,109

Passenger Vehicles 43,528 72,020

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Trucks, Equipment, Locomotives and Marine

Make Up the Heavy-Duty Category

Commercial Marine Vessels

4%

Locomotives22%

Non-Road Equipment

35%

Heavy Duty Vehicles

39%

Oregon: Heavy-Duty Sources of NOx Emissions

Commercial Marine Vessels

16%

Locomotives13%

Non-Road Equipment

25%

Heavy Duty Vehicles

46%

Washington State: Heavy-Duty Sources of NOx Emissions

SOURCE: National Emissions Inventory Data (2014), U.S. EPA

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EligibilityWHAT CATEGORIES OF

VEHICLES AND EQUIPMENT

ARE ELIGIBLE FOR NOX

MITIGATION FUNDING?

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Categories of On-Road Vehicles

Eligible for Funding

Class 8 Local Freight Trucks

Non-Government Owned

Diesel, CNG, Hybrid Repower: Up to 40%

Diesel, CNG, Hybrid Repurchase: Up to 25%

All-electric repower or repurchase: up to 75%

Government Owned: 100%

Class 4-8 Buses (school, transit or shuttle)

Non-Government Owned

Diesel, CNG, Hybrid Repower: Up to 40%

Diesel, CNG, Hybrid Repurchase: Up to 25%

All-electric repower or repurchase: up to 75%

Government Owned: 100%

Dray Trucks

Non-Government Owned

Diesel, CNG, Hybrid Repower: Up to 40%

Diesel, CNG, Hybrid Repurchase: Up to 50%

All-electric repower or repurchase: up to 75%

Government Owned: 100%

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Off-Road Equipment and Technologies

Eligible for Funding

Freight Switchers (Pre Tier 4)

Non-Government Owned

Diesel, CNG, Hybrid Repower: Up to 40%

Diesel, CNG, Hybrid Repurchase: Up to 25%

All-electric: up to 75%

Government Owned: 100%

Ferries/Tugs Repower (Tier 0 to Tier 2)

Non-Government Owned

Diesel, CNG, Hybrid: Up to 40%

All-electric: Up to 40%

Government Owned: 100%

Airport Ground Support

All-electric

Forklifts

All-Electric

The DERA Option

Funds may be used for Non-Federal Match

Designed to capture the wide variety of off-road equipment that would be too large to list in the consent decree

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The DERA Option: Expands list of eligible projects

and opportunities for greater reductions

Figure 1 DERA Option: Trust Funds as

Voluntary Match to Receive EPA

Matching Incentive

Figure 2: DERA Option: Trust funds as

a Larger Voluntary Match to Achieve

Additional NOx reductions

DERA Allocation $200,000

DERA Allocation $200,000

Total Funding $500,000

Total Funding

$1.3M

Mitigation Trust Fund $200,000

Mitigation Trust Fund

$1 M

EPA Bonus

$100,000

EPA Bonus

$100,000

NOTE: Graphic Does NOT include mandatory cost share funds

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Clean Diesel is

the Best

Technology

Choice

MORE CLEAN AIR BENEFITS FOR THE DOLLAR, FASTER

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Clean Diesel Technology is Ready

Today to Reduce NOx Emissions

✓ Clean Diesel = Advanced engines + latest emissions control strategies + ultra-low sulfur diesel fuel

✓ Available Now

✓ No additional infrastructure investments needed

✓ Proven to deliver NOx reductions

✓ Technology of choice by user community

✓ Cost-effective - will yield more clean air for the dollar than other fuels and technologies

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Evolution of Diesel Technology: On-Road

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Evolution of Diesel Technology Off-Road Engines and Equipment

0

2

4

6

8

10

12

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1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

g/bhp-hr Progress to Near-Zero NOx Emissions

Off-Road Equipment: Backhoes and Ag

Tractors

Line Haul Locomotives

Switch Locomotives

Heavy Duty On-Road Vehicles

Clean Diesel Technology Meets Near

Zero Emissions Requirements

Class 3 - 8

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Replacing the Oldest Trucks with the Newest

Generates Substantial Emissions Reduction

0

2

4

6

8

10

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1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

Engine Emissions Standards for Heavy-Duty Trucks and Annual NOx Emissions Reduction from Moving to New Clean Trucks

NOx (g/bHp-hr)

2011 or Newer Emissions Standard

1,282 LBS

1,2

82

lbs

1,0

61

lbs

1,2

82

lbs

84

0lb

s

39

6lb

s

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Investing in new clean diesel technology will achieve

dramatic reductions in PM emissions as well

Health Effects Institute ACES Study of New Technology Diesel Engines Finds Major declines in PM Mass and Numbers Emissions

On-Road Fleet Profile: Washington State

3 out of 4 trucks on the road in WA are eligible for

funding through the Trust

SOURCE: DTF Analysis of Commercial Vehicles in Operation (2016), compiled by IHS Markit

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School Buses Transit Buses Class 3-8 Trucks*(see note below)

Class 8 Trucks (Over 26,000lbs gvwr)

Diesel: 98 %

Gasoline: 1.8 %

CNG 0.2 %

Diesel 86.7 %

Electric 12.6 %

CNG 0.66 %

Diesel 69.2 %

Gas 30.5 %

CNG 0.3 %

Diesel 98.8%

CNG 1.0%

Gas 0.1%

29.5% are 2011 and

newer

33.7% are 2011 and

newer

25% are 2011 and

newer

23.9% are 2011 and

newer

National Avg.: 31.3% National Avg. 35.2% National Avg. 30.0% National Avg. 31.3%

*NOTE: Only Class 4-8 trucks are eligible for VW Settlement funding. This data includes class 3-8.

On-Road Fleet Profile: Oregon

60% trucks on the road in OR are eligible for

funding through the Trust

SOURCE: DTF Analysis of Commercial Vehicles in Operation (2016), compiled by IHS Markit

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School Buses Transit Buses Class 3-8 Trucks*(see note below)

Class 8 Trucks (Over 26,000lbs gvwr)

Diesel: 95%

Gasoline: 5 %

Diesel 100% Diesel 71.0 %

Gas 28.9 %

CNG 0.1 %

Diesel 99.3%

CNG 0.39 %

Gas 0.21 %

25.7% are 2011 and

newer

67.2% are 2011 and

newer

30% are 2011 and

newer

29.4% are 2011 and

newer

National Avg. 31.3% National Avg.

35.2%

National Avg.

30.0%

National Avg. 31.3%

*NOTE: Only Class 4-8 trucks are eligible for VW

Settlement funding. This data includes class 3-8.

Additional Co-Benefits Accrue from

Clean Diesel on the Road

A typical Class 8 tractor on the road for 125,000 miles each year. A clean diesel engines will:

Reduce NOx Emissions by 2.3 tons

Reduce Fine Particle Emissions by 251 pounds

Save 23 barrels of crude oil

Eliminate 9.7 tons of CO2 emissions

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Off-Road

Engines &

Equipment

LARGE ENGINES

LARGE OPPORTUNITIES

LARGE BENEFITS

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EPA 2016 Port Strategy Assessment outlines

the advantages of clean diesel

“Older trucks and equipment are longstanding fixtures of many port operations, and it will take many years before these fleets turn over to newer technology. “

“Accelerating the retirement of older port vehicles and equipment and replacing them with the cleanest technology will reduce emissions and increase public health benefits beyond what would be achieved without further voluntary actions.”

“For example, the emission reductions from replacing older drayage trucks with cleaner diesel trucks is significant, with NOx emissions being reduced by up to 48% in 2020 and PM2.5 emissions being reduced by up to 62% as compared to the Business as Usual case.”

https://www.epa.gov/ports-initiative/national-port-strategy-assessment

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Switch Locomotive Engine Replacements

Yield BIG NOx Reductions

94% Reduction

in NOx from

oldest to

newest “Tier 4”

37,602 LBS

NOx/Year

Replacing 29pre-1992 Port

Trucks with

New Model

Switch Locomotive

Replacing the Oldest

Engines with Newest

“Tier 4” Clean Diesel

SOURCE: National Port Strategy Assessment. U.S. EPA. 2016

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Single Tug Boat Marine Engine

Replacement Offers BIG NOx Reductions

91% reduction

in NOx from

oldest to

newest “Tier 4”

96,000 LBS

NOx/Year

Replacing 76pre-1992 Port

Trucks with

New Model

Tug Boat

Replacing the

Oldest Engines

with “Tier 4”

Clean Diesel

NOx g/Kw-Hr

SOURCE: National Port Strategy Assessment. U.S. EPA. 2016

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Replacing the Oldest Ferry Boat Engines with

New Technology Delivers Immediate Benefits

90% Reduction

in NOx from

oldest to

newest “Tier 4”

62,000 LBS

NOx/Year

Replacing 48 pre-

1992 Port Trucks

with New Model

Ferry

Replacing the

Oldest Engines

with “Tier 4”

Clean Diesel

SOURCE: National Port Strategy Assessment. U.S. EPA. 2016

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Strategies to Achieve Immediate Term NOx

Reduction

The Minnesota

Pollution

Control Agency

estimates that

the fleet of VW

cars generated

600 tons of

excess NOx

emissions

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Nothing Beats Clean Diesel

When it Comes to:

Cost Effectiveness of

Reducing Emissions

Making the Most of

Environmental Mitigation

Fund Investments

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Clean Diesel Maximizes NOx Reduction

Investments for Washington

How to Make the Most of a $113 million Investment for Immediate NOx Reduction

Price Per Application

# of Vehicles or Equipment placed into Service for $113 million

Anticipated NOx Reduction per Year per Project

Total Cost to Exclusively Fund a Particular Project

Cost to Remove Each lb of NOx ($/lb)

Total NOx (lbs) Reduction per year

pre 1991 port truck replacement with Clean Diesel $110,000 1,027 1,282 $113,000,000 $86 1,316,964pre 1991 port truck replacement with CNG $140,000 807 1,292 $113,000,000 $108 1,042,829MY2000 bus replacement with Hydrogen $1,200,000 94 1,162 $113,000,000 $1,033 109,422MY2000 bus replacement with Battery-Electric $880,000 128 1,162 $113,000,000 $757 149,211MY2000 bus with Clean Diesel $370,000 305 1,062 $113,000,000 $348 324,341T0 to T4 Clean Diesel switch locomotive $3,000,000 38 37,602 $113,000,000 $80 1,416,342

Source: (1) National port Strategy Assessment: Reducing Air Pollution and Greenhouse Gases and U.S. Ports". U.S. EPA (September 21, 2016), (2) "clean Diesel Versus CNG Buses: Cost, Air Quality and Climate Impacts." Clean Air Task Force (2012). (3) "From Deceit to Transformation: How Connecticut Can Leverage Volkswagen Settlement Funds to Accelerate Progress to a Clean Transportation System. CONN PIRG. January 18, 2017. (4) "Consortium to Fund New Flyer Hydrogen Buses to ACTransit", Passenger Transport, February 24, 2017. (5) Locomotive engine upgrade cost based on a range of industry estimates.

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Clean Diesel Maximizes NOx Reduction

Investments for Oregon

How to Make the Most of a $73 million Investment for Immediate NOx Reduction

Price Per Application

# of Vehicles or Equipment placed into Service for $73 million

Anticipated NOx Reduction per Year per Project

Total Cost to Exclusively Fund a Particular Project

Cost to Remove Each lb of NOx ($/lb)

Total NOx (lbs) Reduction per year

pre 1991 port truck replacement with clean diesel $110,000 664 1,282 $73,000,000 $86 850,782pre 1991 port truck replacement with CNG $140,000 521 1,292 $73,000,000 $108 673,686MY2000 bus replacement with Hydrogen $1,200,000 61 1,162 $73,000,000 $1,033 70,688MY2000 bus replacement with Battery-Electric $880,000 83 1,162 $73,000,000 $757 96,393MY2000 bus with Clean Diesel $370,000 197 1,062 $73,000,000 $348 209,530T0 to T4 Clean Diesel switch locomotive $3,000,000 24 37,602 $73,000,000 $80 914,982

Source: (1) National port Strategy Assessment: Reducing Air Pollution and Greenhouse Gases and U.S. Ports". U.S. EPA (September 21, 2016), (2) "clean Diesel Versus CNG Buses: Cost, Air Quality and Climate Impacts." Clean Air Task Force (2012). (3) "From Deceit to Transformation: How Connecticut Can Leverage Volkswagen Settlement Funds to Accelerate Progress to a Clean Transportation System. CONN PIRG. January 18, 2017. (4) "Consortium to Fund New Flyer Hydrogen Buses to ACTransit", Passenger Transport, February 24, 2017. (5) Locomotive engine upgrade cost based on a range of industry estimates.

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Summary - #1

States should utilize a framework that considers the largest sources of

NOx emissions & the greatest opportunity for reductions that makes

most of the VW settlement dollars available.

Investments in new clean diesel technology are the best choice to

mitigate NOx emissions because they deliver faster, near term

proven clean air benefits without additional infrastructure or other

investments.

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Summary - #2

Project simplification and streamlining – replacing a few targeted

oldest and largest engines reduces overall state administrative

burdens, as compared to other approaches where infrastructure

investments and technology availability require additional time and

have greater uncertainty. Existing mechanisms provided via DERA.

Replacing older diesel engines with new clean diesel ones yields additional collateral air quality emissions reductions in particulate

matter, CO2 benefits beyond NOx mitigation accrue often in

population centers, and can help address other issues.

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Resources for Clean Diesel in Washington State &

Oregon - www.dieselforum.org/in-your-state

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Large Engine

Upgrades Deliver

Enormous Emission

Reduction Benefits

Learn more about the VW Environmental

Mitigation Fund and Download this

Infographic

http://dieselforum.org/vwfund

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Switch Locomotive

“Repowers” are a Cost

Effective NOx

Reduction Strategy

Learn more about the VW

Environmental Mitigation Fund and

Download this Infographic

http://dieselforum.org/vwfund

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A New Tier 4 Clean

Diesel Engine Powering

a Ferryboat

Significantly Reduces

NOx Emissions

Learn more about the VW

Environmental Mitigation Fund and

Download this Infographic

http://dieselforum.org/vwfund

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Resources Available

The DERA Option: https://www.epa.gov/sites/production/files/2017-01/documents/vw-dera-option-factsheet-2017-01.pdf

Link to Partial Consent Decree: www.epa.gov/enforcement/partial-consent-decree-volkswagen

Link to FAQs: https://www.epa.gov/enforcement/faqs-beneficiaries-vw-mitigation-trust-agreement

Link to Consent Decree Informational Slides: www.epa.gov/sites/production/files/2016-11/documents/webinar_for_prospective_beneficiaries_11_22_2016.pdf

State Program Guide and information: www.epa.gov/cleandiesel/clean-diesel-state-allocations More

VW Settlement and Washington State: http://www.ecy.wa.gov/programs/air/cars/vw_fed.htm

VW Settlement and Oregon: https://www.oregon.gov/deq/aq/programs/Pages/VW-Diesel-Settlement.aspx

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Questions & Answers

Please submit via the Q&A

feature.

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Calendar of Upcoming Events

Making the Most of the VW Settlement: More Clean Air for the Dollar

May 18, 2017 2:00 pm PT – California

June 7, 2017 11:00 am ET – New York

June 7, 2017 2:00 pm ET – Florida

June 8, 2017 11:00am ET – Pennsylvania

June 8, 2017 2:00 pm ET – Texas

June 14, 2017 2:00 pm ET – Cost Effectivenessof Big Engine Replacements and How to Pursue Opportunities

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Thank you for attending! Please

complete our brief 3 minute survey at

the conclusion of today’s session.

Allen SchaefferExecutive Director

aschaeffer@dieselforum.org

Ezra FinkinDirector of Policy and External Affairs

efinkin@dieselforum.org(301) 668-7230

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