Diesel Retrofits

May/June 2008

Funding the Retrofits

Contractors and equipment owners seek help in paying for mandated emissions upgrades to their fleets

By Tony Illia

(Photo courtesy of Ritchie Bros. Auctioneers)

Soaring fuel costs and increased government scrutiny have made reducing diesel emissions a high priority for contractors, but they are finding that retrofitting is expensive.

The U.S. Environmental Protection Agency’s Tier 4 standards will be phased in through 2015, requiring that particulate matter and nitrogen oxide emissions be further reduced by 90%.

So far, the federal government regulates only emissions from new machines, but some state and local jurisdictions are specifying retrofits for existing models. The compliance upgrades can cost thousands of dollars per unit and are often difficult to undertake.

“It can be costly,” says Brian Deery, senior director of the Highway and Transportation Division at the Associated General Contractors of America, Arlington, Va. “There are basically two ways to retrofit. One is by adding an aftermarket device on the exhaust that captures and burns off the emissions. The other fix entails repowering the equipment with a new engine, which is difficult due to the various types of equipment being produced.”

Grant Partnerships

State and federal money can help defray some of the costs. Congress recently approved funds for the first time under the Energy Policy Act of 2005 to help reduce emissions from heavy-duty engines.

Williams Bros. Construction, Houston, used grant money from the state of Texas to partially fund replacement of engines in 47 crawler cranes with new models that have lower emissions.

EPA, through its National Clean Diesel Campaign and its seven Clean Diesel Collaboratives, will award $49.2 million in grants in fiscal year 2008. The money can go toward refueling, repairing, retrofitting, repowering and reducing idling. Public owners are eligible, applying on behalf of their contractors, as are nonprofits like AGC.

AGC of Kentucky, for example, received a two-year, $50,000 grant through the NCDC program in 2007. It represents 50% of the funds made available through the Southeast Clean Diesel Collaborative for a seven state region.

Most of the money went to Cincinnati-based Messer Construction Co., an AGC member with a Lexington, Ky., branch office. Messer is using the funds to install cleaner-burning diesel oxidation catalysts on nearly half of its existing equipment fleet. Twenty-nine of 33 pieces of machinery have been retrofitted so far.

“We wanted to make sure that we could retrofit the most pieces of construction equipment possible,” says John Brazel, AGC of Kentucky’s assistant executive vice president, who spearheaded the grant effort. “Ideally, we are building upon the success that we had on our first efforts.”

A company can save $475 to $950 per year per vehicle by reducing idle time one hour per day, based on $3.17 per gallon for diesel fuel. (Photo courtesy of Caterpilar;Williams Brothers Construction CO. INC.)

The group’s successful application included $100,000 on funds from Messer Construction Co. and industry partners such as Caterpillar, John Deere and Engine Control Systems Ltd. A technical committee determined that diesel oxidation catalysts did not void factory warranties, reduce horsepower or impact fuel mileage.

Grant recipients must file quarterly narrative progress reports that outline equipment effectiveness, mileage and fuel use throughout the life of the grant. AGC of Kentucky is now ready to apply for the next wave of NCDC grants.

Help From the Feds

Other federal retrofit funds are available through the Congestion Mitigation and Air Quality Improvement Program, jointly administered by the Federal Highway Administration and the Federal Transit Administration. It was reauthorized in 2005 under the Safe, Accountable, Flexible and Efficient Transportation Equity Act: A Legacy for Users. “There was an amendment made with SAFETEA-LU that allows money to be used on off-road equipment retrofits for the first time,” says Leah Pilconis, AGC of America’s senior environmental counsel. “Previously, those monies were only being allocated for over-the-road fleets, but only construction equipment being used on federally funded highway projects can receive those funds. And a private fleet owner can’t use it on its own; it will need a government sponsor.”

Since 2001, Texas has provided $545 million in grants for emissions reductions that have cut an estimated 127,707 tons of NOx. (Photo courtesy of Williams Brothers Construction CO. INC.)

The program provides more than $8.6 billion in funds to state transportation departments, metropolitan planning organizations and transit agencies to invest in projects that reduce air pollutants in fiscal years 2005-2009. The distribution formula considers population and the severity of its ozone and carbon monoxide problems within non-attainment or maintenance areas.

Texas implemented its own program financed through an automobile licensing fee and a 2% surcharge on the purchase, lease or resale of off-road equipment. Since 2001 the Texas Emission Reduction Plan has provided $545 million in grants that have eliminated an estimated 127,707 tons of nitrogen-oxide emissions.

Contractors such as Houston-based Williams Bros. Construction Co. Inc. have found the state program easier to navigate than the federal process. “We’re in discussion to try and get some of that [federal] money,” says Bob Lanham, vice president of Williams Bros. “But it gets complicated because you have to bring in a third party as an intermediary.”

The firm, which has a 371-vehicle fleet, has received nearly $20 million in TERP grants over the last five years. The funds have replaced 150 engines in earthmoving machines, 47 in crawler cranes and 174 in trucks with engines that have clean-emission technology. Even with financial help, the program was a major undertaking that took five machine shops years to complete.

Texas officials estimate that replacing those engines will reduce NOx by 3,000 tons over the life of the engines. But the process includes reporting procedures that audit hours of service, mileage and fuel consumption over the life of the grant, which averages seven years. It also doesn’t cover 100% of the expenses.

Williams Bros. has a 50% TERP grant approval rate so far, receiving from 40% to 80% of its requested reimbursement amounts, Lanham says. “The economics have to be right for the companies,” he says. “TERP gives us the opportunity to value our fleet and make modifications without bearing the full brunt of the financial burden.”

Survival on the West Coast

California provides similar incentive grants through its 10-year-old Carl Moyer Memorial Air Quality Standards Attainment Program. During its first six years, it provided $154 million in funding to clean almost 7,000 engines statewide. The program has subsequently reduced daily engine emissions by 18 tons of nitrogen oxide and one ton of particulate matter.

Changing Scene

California’s Carl Moyer Program provides up to$141 million a year in grants through 2015, but the money is going quickly due to stricter state air-emission laws. (Photo courtesy of Caterpilar)

Legislative changes enacted in 2004 provide up to $141 million a year for the program statewide through 2015. But the catch is that it applies only to voluntary efforts and is not available for fleets facing state mandates for noncompliance. And compliance in California will become harder in the future. The state is proposing the most aggressive standards in the U.S. for all off-road diesel machines. Beginning in 2010, the California Air Resources Board would require large fleet owners to meet average emission-rate fleet targets for particulate matter, and nitrogen oxides in some cases, or apply the highest-level, state-verified control system to 20% of their fleet horsepower. According to CARB estimates, more than half of the 180,000 pieces of equipment in the state have dirty Tier-0 engines. CARB estimates the cost of the regulation at $3.4 billion in 2006 dollars, while AGC thinks it is $13 billion.

Moyer funds went quickly last year because of the surging demand for funds by contractors and other owners. ECCO Equipment Corp., a large fleet rental company in Santa Ana, Calif., had repowered or retrofitted 28 pieces of equipment under the Moyer program. Like many in the industry, it now will have to scramble to fund equipment upgrades even as its rental business drops off because of the slowing residential market. “The problem is the money we had [under Carl Moyer] doesn’t exist anymore,” says Gary Rohman, vice president of ECCO’s Visalia, Calif., branch. “We might have repowered 20 engines last year, but our budget this year includes none. We’re in survival mode now.”;