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By David Boyer, Partner, Suparna Jain, Partner, and Kevin Harris, Law Clerk at Atkinson, Andelson,Loya, Ruud & Romo

Reducing vehicle emissions has long been seen as a viable approach to reduce greenhouse gas emissions and improving air quality and climate conditions at a broad scale. Via Executive Order, President Biden has set a goal of achieving net-zero greenhouse emissions by 2050 and has set a 50 percent zero-emission vehicle target by 2030. Additionally, state governments are pushing the adoption of policies and regulations to further intensify the progress of this transition. Through the Governor’s Executive Order N-79-20, California became the first U.S. state to declare that it would ban sales of new internal combustion engines or gas-powered vehicles by 2035. The same Executive Order also stated that California aims for 100 percent of medium- and heavy-duty vehicles in the state to be zero emission by 2045 for all operations where feasible, and by 2035 for drayage trucks. 

To aid in achieving the State of California’s climate goals, the California Air Resources Board (CARB) was charged with establishing state air quality regulations to address the state’s overall approach to accelerate a large-scale transition to zero emission medium and heavy-duty vehicles.  In April 2023, CARB passed its Advanced Clean Fleets (ACF) regulation, which is one part of a broader strategy to deploy medium- and heavy-duty zero-emission vehicles (ZEV) wherever feasible. In September 2023, the Office of Administrative Law approved the rulemaking and filed it with the Secretary of State. The ACF regulation became effective as of October 1, 2023. This memorandum focuses on and provides a general overview of one component of the ACF regulations, specifically the regulations applicable to state and local government fleets. 

This regulation will have a significant effect on state and local government agencies, by increasing the amount of reporting required annually for all vehicles added to and removed from a state or local government agency’s fleet. For agencies under the jurisdiction of a larger entity, joint compliance may be an option to explore under the regulation; however, annual reporting must be completed individually. In addition to the required reporting, state and local agencies will be required to determine which lower-emissions vehicles can meet their needs while instituting a process to go about acquiring, fueling, and otherwise maintaining such vehicles in the very near future.

Do the ACF State and Local Government Fleet Requirements Apply to Your State or Local Government Agency? 

With respect to state and local government fleets, the ACF regulation defines a state or local government agency as a city, county, public utility, special district, local agency or district, or a public agency of the State of California, and any department, division, public corporation, or public agency of the State of California. Affected agencies are those that have jurisdiction in California and own, lease, or operate in California, one or more vehicles with a Gross Vehicle Weight Rating (“GVWR”) greater than 8,500 pounds.  (Reg, § 2013, subd. (a)(1) & (2).

Unfortunately, the ACF regulation does not clarify if all local agencies, whether or not they own, lease, or operate one or more vehicles with a GVWR of over 8,500 pounds, must comply with the reporting requirements.  Accordingly, local agencies should check with CARB prior to the initial reporting deadline to ensure whether or not their local agency must file a report, even if it is to specify it has no such vehicles.

What is Required Under the ACF State & Local Government Agency Fleet Requirements?

Beginning January 1, 2024, state and local government fleet owners must select one of two options, either the (1) “ZEV Purchase Schedule” or the (2) “ZEV Milestone-Based Schedule.”  (See also attached flowchart) 

1.         ZEV Purchase Schedule:  Beginning January 1, 2024, 50 percent of the total number of vehicle purchases for the California fleet made in each calendar year must be zero-emissions vehicles (“ZEV”), and starting January 1, 2027, 100 percent of purchases for the California fleet in each calendar year must be ZEV. (See Reg, § 2013, subd. (d)(1)(A)-(B).) A “vehicle purchase” includes placing an order to acquire legal or equitable title to a vehicle, but expressly does not include renewing leases of vehicles that are already in the fleet. (See Reg, § 2013, subd. (b) [vehicle purchase definition].)  However, a state or local government agency that either: has jurisdiction solely in a designated low population county; owns, operates, or leases ten or fewer vehicles in the fleet; or splits its service area between a designated and non-designated county and at least 90 percent of the service area (sq. mi.) is in the designated low population county may delay the start of their ZEV purchases until January 1, 2027, at which point 100 percent of vehicle purchases must be ZEVs.  (Reg. § 2013, subd. (d)(1))

2.         ZEV Milestone-Based Schedule:  Until January 1, 2030, fleet owners may elect to permanently comply with the ZEV milestones applicable to “High Priority and Federal Fleets.” (Reg, § 2013, subd. (e).) If an entity elects the ZEV milestone option, it must report such election/intention under the requirements stated in Section 2013.2 (c)(1)(I) prior to April 1, 2024. (Reg. § 2013, subd. (e)) and may not switch back to the ACF Regulation pertaining to State & Local Agency Fleets.  Instead, such an entity will remain bound to comply with the regulation for High Priority and Federal Fleets (i.e., California Code of Regulations, title 13, sections 2015-2015.6).

Notwithstanding the schedule selected by a state or local government agency, the ACF rule treats “near-zero-emissions vehicles” (“NZEV”), which are defined as those capable of operating like a ZEV using electricity stored on-board the vehicle for a minimum number of miles, the same as ZEVs for purposes of compliance. (Reg. § 2013, subd. (b) & (f)). Each ZEV may only be counted once for compliance while remaining in the fleet, and ZEV purchases in excess of the required amounts made before the deadlines may be counted towards future purchase requirements. (Reg. § 2013, subd. (h) & (i)). Individual departments, divisions, districts, subsidiaries, or agencies under the same state or local government agency’s jurisdiction may comply jointly with the ACF rule if the combined fleet meets the rule’s requirements. (Reg. § 2013, subd. (k)).

Are there any Exemptions/Extensions to these Fleet Requirements?

The ACF rule incorporates exemptions based on either the category of vehicles within a California fleet or whether the fleet owner requests such an exemption and/or extension while meeting the applicable requirements. If applicable, both types of exemptions allow fleet owners to purchase internal combustion engine (“ICE”) vehicles which would otherwise violate the ZEV purchase requirements of the ACF rule. However, fleet owners requesting exemptions must be in compliance with the ACF rule’s general ZEV purchase requirements in order for an exemption to be utilized. (Reg. § 2013, subd. (n)).

Vehicles categorically exempt from ZEV purchase requirements of the ACF rule include:

·        school buses as defined in California Vehicle Code Section 545(a);

·        military tactical vehicles as described in Title 13, CCR, Section 1905;

·        vehicles awaiting sale;

·        emergency vehicles as defined in California Vehicle Code Section 165;

·        historical vehicles;

·        dedicated snow removal vehicles;

·        two-engine vehicles;

·        heavy cranes as defined in Title 13, CCR, Section 2021(b)(16);

·        transit vehicles subject to the Innovative Clean Transit Regulations commencing with Title 13, CCR, Section 2023; and

·        vehicles subject to the Zero-Emission Airport Shuttle Regulation. (Reg. § 2013, subd. (c)).

Even if fleet vehicles are not categorically exempt, there are various exemptions and/or extensions (See attached flowchart) that state and/or local government agencies may be able to utilize, depending on the schedule option selected.  Some include, but are not limited to the following:

·        “Backup Vehicle Exemption” allows fleet owners to purchase a new or used ICE vehicle and exclude such vehicle from the ZEV purchase requirements if the vehicle is operated less than 1,000 miles per year (excluding emergency operations); the fleet owner reports the vehicle as a backup vehicle and submits the required odometer readings; and the vehicle is capable of operation in California and remains part of a compliant fleet. (Reg. § 2013.1, subd. (a)).

·        “Daily Usage Exemption” allows fleet owners to purchase a new ICE vehicle with the same configuration as the ICE vehicle being replaced if no battery-electric vehicle (“BEV”) is available to purchase which meet the demonstrated daily usage needs of vehicles currently in the fleet. (Reg. § 2013.1, subd. (b)). Fleet owners seeking this exemption must also submit the following information when requesting the exemption: (1) the make, model, weight class, configuration, and a photograph of the ICE vehicle to be replaced; (2) the BEV available for purchase, along with its respective information under item (1); (3) the range of the vehicle, or the needed rated energy capacity of the vehicle if it is truck mounted or operated while stationary; (4) a daily usage report for a period of at least 30 consecutive days in the last 12 months for all ICE vehicles of the same weight class and configuration, including daily mileage, energy use, and hours of operation if applicable; and (5) a description of daily assignments and routes used by existing vehicle configurations with an explanation of why existing BEVs available cannot be charged or used. (Reg. § 2013.1, subd. (a)).

·        “ZEV Infrastructure Delay Extensions” as set forth below, can be requested if fleet owners experience delays beyond their control on a project to install ZEV fueling infrastructure, but may only be requested of ICE vehicles being replaced at the site experiencing the delay. This extension may also apply to locations where the fleet owner is under contract for one year or longer to charge or fuel their ZEVs prior to beginning the infrastructure project. The extension request must be submitted at least 45 days before the next available compliance date. (Reg. § 2013.1, subd. (c)(1)).

• “ZEV Infrastructure Construction Delays” fleet owners may request this extension if they experience a construction delay due to circumstances beyond their control.  An extension for up to two years may be granted, beginning on the applicable compliance date for the number of vehicles that qualify for the extension, per project.  Required criteria and/or documentation that must be submitted include: (1) documentation showing an executed contract for ZEV fueling infrastructure installation including a construction permit showing a permit issuance date of at least one year prior to the next compliance deadline; (2) documentation showing delay is a result of any of the following after the permit is obtained: change in general contractor; delay in manufacturer and shipment of ZEV fueling infrastructure equipment; delays in obtaining power from a utility; delays due to unexpected safety issues on the project, discovery of archeological, historical, or tribal cultural resources as described in CEQA, or natural disasters; (3) a letter to CARB from the responsible official explaining the reason for the delay and other issues; and (4) documentation of executed ZEV purchase agreements. (Reg. § 2013.1, subd. (c)(1)(A)-(E)).

• “ZEV Infrastructure Site Electrification Delays” may be submitted where the electric utility provider determines that it cannot supply the requested power where ZEVs will be charged or refueled prior to the next compliance date. (Reg. § 2013.1, subd. (c)(2)). If the criteria for the electrification delay is met, an extension may be requested for up to 3 years for ZEV delivery dates to be aligned with the time needed by the utility to supply the needed power. (Reg. § 2013.1, subd. (c)(2)(A)). The electrification delay may be granted for the number of ZEVs to which the utility cannot supply sufficient power, but the fleet owner must deploy the maximum number of ZEVs that the utility can supply in order to maintain the extension. (Reg. § 2013.1, subd. (c)(2)(B)).

·        “ZEV Purchase Exemptions” allow fleet owners to purchase a new ICE vehicle if a needed configuration is not available under the ZEV Exemption List or the ZEV Purchase Application. (Reg. § 2013.1, subd. (d)). The ZEV Exemption List requires CARB to publish a list of vehicle configurations which are not available for purchase as ZEVs or NZEVs, and the exemption expires when configurations are determined to be available for purchase. (Reg. § 2013.1, subd. (d)(1)). The ZEV Purchase Application allows fleet owners to purchase a new ICE vehicle of the same configuration as an ICE vehicle being replaced if it can be shown that the ZEV or NZEV manufacturer does not offer a chassis, or complete ZEV or NZEV of the needed configuration. (Reg. § 2013.1, subd. (d)(2)).

·        “Mutual Aid Assistance” exemption. Under this exemption, fleet owners with a mutual aid agreement to assist other entities during a declared emergency event are allowed to purchase new ICE vehicles in an amount up to 25 percent of the total number of vehicles in their California fleet. (Reg. § 2013.1, subd. (e)). California fleets granted this exemption need only be comprised of at least 25 percent ZEVs until 2032, 50 percent ZEVs until 2035, and 75 percent ZEVs after 2035. (Reg. § 2013.1, subd. (e)). Notably, it must also be shown ZEVs of the same weight class and configuration cannot be charged from 10 to 80 percent of their rated energy capacity within 1 hour by mobile ZEV fueling providers. (Reg. § 2013.1, subd. (e)(3)).

·        On October 8, 2023, Governor Newson signed AB 1594, which was expressly developed in response to the ACF regulation.  Accordingly, it can be read as an additional carve out/exemption to the ACF regulation. However, please note there are no court decisions or legal authority speaking directly to this at the moment.  AB 1594 requires any state regulation that seeks to require, or otherwise compel, the procurement of medium- and heavy-duty zero-emission vehicles to authorize public agency utilities to purchase replacements for traditional utility-specialized vehicles that are at the end of life (as determined by CARB in consultation with the public agency utilities) when needed to maintain reliable service and respond to major foreseeable events, including severe weather, wildfires, natural disasters, and physical attacks. AB 1594 defines a public agency utility to include a local publicly owned electric utility, a community water system, a water district, and a wastewater treatment provider. 

Important Deadlines Under the ACF Rule

Under the ACF rule the “Compliance Date,” is January 1 of each calendar year beginning in 2024. For state and local government agencies, compliance with the requirements of the ACF rule will be determined annually as of the compliance date. (Reg. § 2013, subd. (m)). Agencies should be mindful of the dates upon which changes in ZEV purchase requirements go into effect under the schedule with which they elect to comply. An agency’s choice of compliance schedule must be reported by April 1, 2024. (Reg. § 2013, subd. (e)). As discussed below, the annual reporting period will be during the month of March, with all required reporting to be submitted by April 1.

Recordkeeping and Reporting Requirements

The ACF rule requires several categories of documents to be submitted annually for compliance through the CARB ACF webpage, unless otherwise required by the regulation. These other methods of submission will mainly apply to certain exemption and extension requests. The annual reporting period occurs during the month of March, and fleet owners must submit a compliance report no later than April 1 of each year until April 1, 2045. The initial report will be required by April 1, 2024. (Reg. § 2013.2, subd. (a) & (b)). Fleet owners are required to maintain records of reported information and the accompanying documentation for no less than five years and make such records available to CARB within 72 hours or any written or verbal request for audit. (Reg. § 2013.3).

The compliance report is required to include the state or local government agency’s information, which primarily consists of the agency’s identifying information, contact information, jurisdiction, and whether the agency will permanently opt into the ZEV Milestone-Based Option and no longer be subject to the requirements for state and local agencies. (Reg. § 2013.2, subd. (c)(1)). In addition, the annual compliance report must contain basic information regarding each vehicle in a qualifying California fleet, such as the make, model, VIN number, vehicle GVWR, and information concerning the vehicle’s purchase. It must also include whether any vehicle will be designated under any exemption, the engine family, engine model year (if added to the fleet after January 1, 2024), and odometer readings if necessary. Finally, the annual compliance report must identify vehicles which are being replaced and include information regarding funding contracts for any vehicle if a state-funding program excludes the vehicle from the ACF rules. (Reg. § 2013.2, subd. (c)).

Changes to an existing California fleet have separate reporting requirements and must be reported to CARB within 30 calendar days of the change. Changes that must be reported include additions to and permanent removals from the fleet, backup vehicles which exceed the mileage limit under the applicable exception, and conversions of any vehicle to a ZEV fuel type. (Reg. § 2013.2, subd. (e)). Fleet owners should also be aware that the ZEV Purchase Exemption will require submission of the purchase agreement for the new ICE vehicle and clear, legible photographs of certain areas of the vehicle. (Reg. § 2013.2, subd. (g)).

Lastly, California fleet owners may establish the compliance of their respective fleets after the initial reporting deadline by submitting documents online and through email to CARB. However, penalties for late submissions are scheduled to begin on January 1, 2025, and each month without the requisite submission will constitute another violation. (Reg. § 2013.4, subd. (b)). The ACF rule does not state what these penalties will be, so state and local government agencies should look for guidance from CARB in the future regarding penalties or contact CARB directly for more information.

Enforcement of the ACF Regulation Requirements

Pursuant to the ACF Regulation, any person who fails to comply with the requirements, who fails to submit any information, report, or statement required by the regulation, or who knowingly submits any false statement or representation in any application, report, statement, or other document filed, maintained, or used for the purposes of compliance with the regulation may be subject to penalties.  The ACF Regulation does not define “person”, nor does it specify what the penalties will be, so state and local agencies will need to contact CARB for more information.

Conclusion

CARB’s ACF regulation places responsibility on all state and local government agencies to begin the transition from traditional ICE vehicles sooner rather than later. Agencies should begin considering how they will implement their own ZEV purchase procedures and begin to determine which available vehicles will be capable of taking on the duties of their current fleets. Given imminent compliance deadlines and reporting obligations, it is imperative for these agencies to begin considering which compliance schedule they will prefer to follow and how to implement their own ZEV purchase procedures.

Communication is provided for general information only and is not offered or intended as legal advice. Readers should seek the advice of an attorney when confronted with legal issues and attorneys should perform an independent evaluation of the issues raised in these communications.