The U.S. government is offering hundreds of millions of dollars in incentives to clean up diesel exhaust stacks in the field through grant programs. Getting the money is a competitive process, but any equipment owner willing to work for it can get a share of the money to help pay for emissions-related repowers, rebuilds, retrofits or even machine replacements. Their machines will not only work cleaner, but more powerfully and fuel efficiently. Winning grant proposals draw together smart alliances of equipment professionals and dealers to work with local governments that want cleaner air.
In 2009 and 2010, the Environmental Protection Agency is distributing up to $120 million for clean diesel activities courtesy of EPA appropriations, and the American Recovery and Reinvestment Act of 2009 has already added $300 million. Diesel clean-up money is disbursed through the National Clean Diesel Emissions Reduction Program, sometimes referred to as "DERA," which was created by the Energy Policy Act of 2005.
One way DERA funding is disbursed is through competitive grants administered by the ten EPA regions. For example, Region 4 received 98 applications requesting $140 million in grant funds in the first half of 2009. The Associated General Contractors (AGC) of Kentucky was awarded $2 million on behalf of its members to support retrofit and repower of 87 diesel construction machines and to reduce equipment idling on 100 jobsites.
Another national incentive supporting diesel emissions reduction comes through state departments of transportation from the Congestion Mitigation Air Quality (CMAQ) Improvement Program. It was authorized in the Bush administration's last transportation act, allowing state DOTs, metropolitan planning organizations and transit agencies to invest $1.6 billion annually. States control most CMAQ money, directing much of it to projects such as signals and lane additions to reduce traffic congestion. Some state legislatures, though, have created grant programs funded by their CMAQ allotments, such as Ohio's Diesel Emissions Reduction Grants.
Local and regional activities of EPA's National Clean Diesel Campaign are coordinated through regional clean diesel collaboratives hosted by EPA that include local agencies and private-industry stakeholders. National, regional and local grant opportunities are tracked through the collaboratives and through the EPA regional offices.
Many local AGC chapters have been active as eligible entities to help members devise clean-diesel projects, aggregate those projects into grant proposals and submit them. Clean Cities and Clean Fuels Coalitions are nonprofit organizations supported by the Department of Energy that sometimes offer funding for their own grant programs, and maintain databases of funding opportunities. They can also help create and submit proposals.
Proposals for DERA and CMAQ grants must be submitted on behalf of private companies by an eligible entity — typically a government or nonprofit agency. The AGC chapters and Association of Equipment Management Professionals have been active eligible entities on behalf of equipment owners. The EPA's Clean Diesel Collaboratives are eligible to submit some grant proposals, as are the DOE's Clean Cities and Clean Fuels Coalitions. Any number of local nonprofits and agencies are also possible partners to help win grant awards.
"I'll pull census data; find out how many people with adult asthma live in the county where the machines work. Look at how many major highways run through the county, and find out if it is meeting air quality standards or not," says David Celebrezze, director of air and water special projects for the Ohio Environmental Council. This information helps create compelling grant proposals. "Most programs that I know of give preference to fleets that are in counties that are failing the federal air-quality standards for either ozone pollution or particulate matter."
Establishing relationships with a network of eligible entities is good insurance against the vagaries of government and nonprofit budgets. As work load and staffing changes, agencies that acted as eligible entities for grant proposals one year may not be able to work with contractors the next year.
In requests for proposals (RFPs), each EPA region establishes a target dollar range for grant applications they'll accept.
"The funding range in Region 5 for 2009 and 2010 was $250,000 to $1.5 million," says Steve Marquardt, with the U.S. EPA's Region 5 and Midwest Clean Diesel Initiative. "Many fleets need funding levels below $250,000, so they're going to need to partner with other people [combine their diesel-clean-up projects with other fleets' projects] to be eligible to apply."
Public/private partnerships are characteristic of most diesel-emissions grant programs. The state of Ohio's DERG program required it.
"When we submitted our grant proposal in spring of 2008, the state told us they couldn't give it to us because we didn't have a proper public/private partnership agreement," recalls Jim Fox, vice president of Great Lakes Construction Co. in Hinckley, Ohio. "We knew there was going to be another round in the fall of '08, and figured we'd better get busy finding a public partner.
Fox went to the City of Lakewood, Ohio — a town known for its "green" image — to tell the service director about Great Lakes' plan to repower a pair of D8N dozers for lower emissions. It took about a month to hit the right meetings, but it wasn't hard to convince the city council to act as Great Lakes' eligible-entity partner and submit their proposal to the state.
"They liked the idea of being on the leading edge, so it passed through the council," Fox says. "The city lawyers crammed and we had the agreement in hand the week before it was due before the Ohio Department of Development."
Funding legislation acknowledges the variability in local air quality by placing distribution of most funds in the hands of state agencies. So the characteristics of a successful grant application are going to change from one area to the next. Grant applications are typically scored using a point system that varies with air-quality priorities. That's why partnerships with local agencies, and local equipment specialists such as dealer service departments, are invaluable.
When local eligible entities combine a diesel clean-up project with other projects, they can include those from air-quality hot zones — places where air quality is dire — and improve the chances of approval for all the projects incorporated in that proposal. They can also balance your engine retrofits or rebuilds with a municipal fleet's idling-reduction program and a school-bus company's exhaust retrofits, for example.
"EPA is looking to get the most bang for their buck, so any project that is going to achieve large reductions of criteria pollutants [particulate matter and oxides of nitrogen] are going to be attractive," says David Abel, diesel specialist with the Mid-Ohio Regional Planning Commission, which has successfully applied for diesel emissions reduction grants on behalf of its members. "And, secondly, they want those emission reductions to be realized in Ohio counties that failed to meet federal air-quality standards — major metropolitan areas such as Columbus, Cleveland, Cincinnati, Akron. And then EPA is also looking to fund collaborations — multiple fleets from different areas of the state and across multiple sectors: construction, transportation, agriculture, marine, that sort of thing."
Diesel emissions reduction grants fund up to 100 percent of projects that include installation of verified retrofit technologies (such as diesel oxidation catalysts and particulate filters) or verified idle-reduction systems. Caterpillar's Emissions Upgrade Groups — selections of emissions-related engine parts that, when installed by a Cat dealer, qualify an engine rebuild as an emissions retrofit and for DERA coverage of emissions-related components and labor. Certified engine repowers are funded up to 75 percent. Complete machine replacements can be funded to 25 percent. Last year one Ohio contractor, for example, was approved for about $300,000 in funding to replace five machines — a Cat D6 dozer and four Komatsu hydraulic excavators in the PC200 to PC300 range — with new Tier 3 equipment.
"We're expecting EPA- or CARB-verified emissions retrofit technology, or certified engines," says Marquardt. "Usually it's retrofits, cleaner fuel, idle-reduction technology, repowers, replacements."
For machines working in the worst nonattainment areas, it may be best to propose the steepest pollutant reductions — repowering unregulated Tier 0 machines (built before 1995 or 1996) with Tier 3 engines.
"With your larger horsepower engine you get more improvement per dollar," says Brad Friend, product support sales rep and emissions business manager at Ohio CAT. "It seems like the proposals we've got approved have been for repowering Tier 0 machines with Tier 3 engines in the 300-horsepower range. It costs a lot of money to do that, but the emissions improvement is pretty significant."
Friend has been instrumental in developing diesel-emissions proposals for state and federal grant competitions for more than three years. Only one Ohio CAT customer has applied for exhaust filters so far, but many others received grant funding for repowers.
"With a repower, the customer is able to take equipment from Tier 0 to Tier 3 emissions levels for about what it would cost to do an out-of-frame overhaul on the Tier 0 engine," Friend says. "For customers who are planning an engine overhaul anyway, it's a good deal."
In nonattainment areas where air quality is not as severe as in much of Ohio, repowering with Tier 1 or Tier 2 engines delivers an attractive cost per kilogram of pollutants eliminated at a lower out-of-pocket cost to the state and the equipment owner.
Mike Lazarra, product support sales manager at Michigan Cat, has high hopes for Caterpillar's engine upgrade groups in the current round of DERA funding despite having been successful in past grant applications with repower projects.
"The government likes a rebuild even better than a repower because there is less waste," says Lazarra. "You're reusing the current castings and making the engine run cleaner."
The fact that a Tier 1 engine emits more than a Tier 2 or Tier 3 engine may not be as critical in some areas as being able to upgrade more of the engines in those areas.
Exhaust retrofits, such a diesel particulate filters or oxidation catalysts, are also 100-percent funded in DERA grants, but offer less tangible benefits to the equipment owner. Nevertheless, Grace Pacific used part of its second major diesel-emissions grant in Hawaii to fit almost its entire gravel-hauling fleet with diesel oxidation catalysts (DOCs). Hawaii has no nonattainment areas, but ash from the active volcanoes frequently reduces air quality. Not appearing to contribute to the problem has benefits to the contractor.
"Even though the DOC is only doing 25 or 30 percent emissions reduction, it still makes a pretty significant difference in what you see coming out of the stack," says Joseph Shacat, the company's environmental compliance manager. "When you don't see smoke coming out of a piece of construction equipment, you don't really think anything of it — it's kind of a neutral thing. But when you see that black smoke come out of a stack, it's a negative. So we went from a negative perception to a neutral perception, which I consider to be a major improvement."
Grace Pacific has hired consultants to help pull together its grant proposals for the better part of four years, and the company has spent about $230,000 in government money upgrading its fleet with repowers and replacements, as well as retrofits.
"I think the benefits definitely outweigh the cost associated with hiring a grant writer," says Shacat. "The grant proposal might cost up to $7,000, but then the value of the grant could be several hundred thousand dollars. If you repower and replace equipment, you're going to get better fuel consumption and more power, better productivity and less downtime. So that proposal pays for itself pretty quickly. There is some risk involved — maybe you don't get funded — but if you do, then it's definitely worthwhile."
Enthusiastic industry participation in voluntary diesel-exhaust cleanup incentives could actually forestall regulation in some states. The Associated General Contractors loudly and clearly told Congress that U.S. contractors don't want clean-diesel regulation when they, in partnership with the Clean Air Task Force, proposed Clean Construction Principals.
The Clean Construction Principals proposal includes sample contract language to be used in bid specifications of large construction projects. The language requires contractors' equipment to meet certain emissions criteria. AGC and the Clean Air Task Force intend for Clean Construction Principals to become part of the language of the highway authorization bill. The plan allows contractors to charge the cost of machine rebuilds, repowers, retrofits or replacements to the project owner in the form of change orders. That way, emissions-reduction costs are handled after the bidding and project award. The proposal suggests tapping CMAQ dollars to pay for the change orders.
Expectations for cleaning up existing diesel engines are not diminishing. Two facts confirm it: 1) worsening air quality in most populated areas; and 2) billion-dollar emissions-grant incentive programs that started under a Republican president and continued into a Democratic administration. Equipment owners who quickly learn to earn grants will use more grant funds to modernize their fleets and prepare their businesses for survival in what will inevitably be a more incentivized or regulated clean-diesel future.
|Where to Get Clean-Diesel Grants|
|20 Sources of Diesel-Emissions-Grant Funding
|Contractors Who Win Grants|
|Grants Pay to Repower Two D8Ns
|Uncle Sam Pays Grace Pacific $230,000 to Refresh its Fleet
|More Online Resources|
|Project Narrative Sample
|EPA's Diesel Emissions Quantifier
|Clean Air Task Force
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