GHG panel dissects Phase 2 proposal

Feb. 5, 2016
THE Phase 2 Greenhouse Gas rule is about fuel efficiency but will have a financial impact. Phase 2 will increase the cost of new trailers.

THE Phase 2 Greenhouse Gas rule is “probably one of most financially impactful regulations” that has happened to the industry in the past two decades and will radically change how trailer manufacturers relate to their customers, according to Robert Lane, VP of engineering & product innovation for Wabash National.

“It can be positive,” he said. “It is about fuel efficiency. But it’s going to have a financial impact on you, us, and our customers. And we need to be ready to understand it.

“We’re very concerned. We want to understand it and work with EPA to understand how it’s going to impact us. It’s really about one thing—and that’s cost. It’s going to increase the cost of the trailer to us, to you, and to the customer, but it is about payback also. These are fuel-efficiency technologies that are going to improve trailers in the right applications. And that’s what we have to focus on.

“But it’s also going to change the dynamics of how we relate to our customers. In a lot of cases, we’re order takers. Our customers know their applications and understand the equation they need in those applications, understand the options available to them and spec out equipment they believe they need for that application. They are starting to adopt these technologies, but we’re not where we need to be in 2018 and nowhere close to where we need to be in 2027, so it’s going to change that relationship of how these technologies come to market.”

Lane was one of four panelists for a session moderated by Al Cohn, director of new market development & engineering for Pressure Systems International Inc. The other panelists: Dave de Poincy, president/COO of East Manufacturing; Dennis Johnson, director of the Technology Assessment Center, Transportation & Climate Division, for the US Environmental Protection Agency (EPA); and Tad Wysor, senior technical and policy advisor at EPA’s Office of Transportation and Air Quality (OTAQ).

EPA SmartWay has issued new rulemaking for a Phase 2 program that will include trailers to further reduce CO2 emissions and fuel consumption in the future. This is the first time that the trailer has been considered as part of the overall package as far as fuel consumption is concerned on newly manufactured vehicles, creating new challenges for trailer OEMs and component manufacturers.

Lane said that unlike SmartWay, the Phase 2 GHG rule is not optional. And unlike CARB, it puts the burden of compliance on the OE with annual reduction targets and a 100% compliance requirement for applicable models. Between 2018 and 2020, all applicable trailers will have appropriate combinations of automatic tire inflation systems (ATIS), low rolling resistance tires (LRR), tails, and skirts. By 2027, it will look different.

“Right now, it’s existing technology that people are comfortable with,” he said. “But when we get to 2027, we’re going to need new technologies, whether it’s new devices we haven’t seen yet or improvements on existing technologies and existing devices. We have to add new technologies. And that’s dollars. The devices aren’t free. Technology isn’t free. It has a payback. We have to teach our customers. We have to help them solve that return on investment (ROI).”

Lane said that it’s accepted in the marketplace today that in the right application, trailer side skirts save between 4% and 8% on fuel; LRR, 2%-4%; trailer boat tails, 1%-6%; duals and wide base tire inflation, 1%-2%; trailer under-tray systems, 1%-3%; and trailer-mounted gap reducers, 1%-2%.

“Our customers are doing the ROI calculations and they are starting to move to these technologies,” he said, “and we really need them to move to these technologies, because in 2018, we have to meet the reduction targets that are set forth in the regulation. In 2016, they will finalize the regulation. The good news is that with the adoption curve, we’re well on our way. Right now, 60% of what we produce has aerodynamic devices on it. That’s mostly skirts. And 86% of what we produce now has low rolling resistance tires and 56% has tire inflation systems.

“So customers are seeing the benefits of technologies and seeing ROI. We have to provide EPA with evidence of compliance and what it will look like in 2018. In 2027, it’s not going to be a simple matter to get to.

“We are seeing a continued improvement in the take rate, but as I look at it as a trailer OE and being responsible for engineering, I look at the compliance side. If a customer brings me new technology and says, ‘I want this on a trailer,’ and they want to replace my technology with their technology and it messes up my compliance, I’m going to have to say no, because I have to have 100% compliance on all my trailer models. That’s going to change the way I, as a trailer OE, am going to look at advances in fuel-efficiency devices in the industry. We also have to work on cost. As competition comes into the marketplace, we’re going to see a cost reduction on aerodynamic devices, and that will help us with implementation.”

What is the real impact going to be on van trailer OEs and dealers?

The good news:

•  Existing technology appears to achieve desired reductions. “We can get there by 2018. Right now, 60% to 70% of the industry meets 2016. That means 30% to 40% of what we put on the street is going to have to have technologies or devices added to it, and that costs.”

•  It gives us a pathway to add new technology that is part of proposed regulation

•  The industry was already on the adoption curve for existing technology.

The bad news:

•  Forced compliance for all applicable trailers. “So if you have a customer who has made the decision, after looking at cost, that they do not want the technology and it doesn’t work for them, unless we can get an exemption for that model and application, we have to sell that technology to the customer that he doesn’t want. That’s just part of the regulation.”

•  Increased compliance infrastructure and costs. “I have to do reports. I have to analyze my quotes coming in and orders going out. I have to make sure I have compliance through the year because I can’t catch up at the end of the year. The penalties for noncompliance will eventually be steep, so we are going to comply.”

•  Potential CARB response. “Are they going to accept this rule? When we get the next CARB iteration, is it going to be conflicting with GHG 2? Is it going to be complementary? Is it going to be confusing? We don’t know that yet.”

•  Readiness plan. “We have to continue to do a better job. That means educating our sales force and customers on that value. Suppliers are going to have to help us articulate the value to the customer.”

De Poincy offered a different perspective—one from a company that manufactures 2500 to 3000 trailers a year, rather than tens of thousands.

Many of the industry’s top 25 trailer manufacturers are considered “small manufacturers” by the Small Business Administration (SBA) based on the fact that they have fewer than 500 employees. Wysor earlier had said these manufacturers could possibly have an additional year to meet the regulation’s requirements.

“That’s what we’re hoping for,” de Poincy said. “When you go to the bottom of the top 25 trailer manufacturers, they’re making 800 a year. We have different issues. We typically build specialty products in low volume: platform trailers, flatbeds, drop-decks, lowboys, container chassis. Some are into tankers, dump trailers, refuse, heavy haul, logging, chip trailers, livestock. Small manufacturers typically don’t have the resources available to comply with the new regulations.

“We typically don’t have large organizations to handle large regulatory issues. We have one or two guys who wear a lot of hats. We’re behind the curve. To throw regulations at us we’re not used to as small manufacturers, it can be overwhelming. We’re fighting for all small manufacturers to put it off for a year and give us more time and exclude many of our products.”

EPA is proposing to exclude many of these trailer types from the program. EPA is relying on manufacturers to provide comments specific to meeting one or more of the following characteristics to be excluded:

•  Trailers designed specifically for in-field operations in logging or mining.

•  Trailers designed to operate at low speeds such that they are unsuitable for normal highway operation.

•  Trailers with permanently affixed components designed for heavy construction that allow the trailer to perform its primary function while stationary. This includes crane trailers and concrete trailers.

•  Trailers less than 35 feet long with three axles, and all trailers with four or more axles (including lift axles).

•  Trailers intended for temporary or permanent residence, office space, or other work space, such as campers, mobile homes and carnival trailers.

•  Trailers designed specifically to transport livestock.

•  Trailers built before January 1, 2018.

•  The definition of “trailer” in 1037.801 of the rule excludes equipment that serves similar purposes but are not intended to be pulled by a tractor. For example, car haulers designed to be pulled by a vehicle with a pintle hook or hitch.

De Poincy said the big category for East is trailers less than 35 feet long with three axles, and all trailers with four or more axles (including lift axles).

“That’s good news for us that those could be excluded,” he said.

If a trailer type is excluded from the program, manufacturers would not be required to report to the EPA. There are no regulatory requirements.

The EPA is seeking comments on whether, in lieu of the exclusion of trailers from the program, the agencies should instead exempt these trailers from the standards, but still require reporting to the agencies in order to verify that a manufacturer qualifies for an exemption. If a trailer type is exempt, they would still have some regulatory requirements under this proposal and would be required to report to the EPA.

There could be reduced requirements for non-aero trailer types—trailers for which no aerodynamic devices are practical. Non-aero trailers may only require LRR tires and ATIS.

“Not all tire sizes and tread designs are available yet for specialty trailer applications in LRR tires,” de Poincy said. “ATIS systems currently have limitations. Most do not have the ability to deflate and can only inflate up to 120 psi. Current truck/tractors only have the ability to supply 120 psi, while some tire applications require 125-130 psi. Proper tire inflation for specific loads is required. Being overinflated or underinflated defeats the purpose for better fuel economy and improved tire wear.

“More time is needed to understand the effects and needs of ATIS systems for vocational and specialty trailers. I think these things can work. I think they do work. But we look at the different applications and we need more time to understand it for the vocational and specialty market.”

In the end of the panel discussion, Wysor and Johnson participated in a Q&A.

Q: There are 10 categories of trailers in the proposal. With all that complexity, do you find any concern?

Wysor: We haven’t gotten all the comments in from the major players. But what you see in the rule is our effort to consider the input from groups.

Johnson: EPA tries to divvy up the industry, identify the best returns for the dollars spent. Now is your time to say what is right in this proposal as well as what you think is wrong Excluded trailer? Technologies? Are there people selling inferior products?

Q: Is there a grandfather clause?

Wysor: No. It applies to newly manufactured trailers only.

Q: What if people remove technology?

Johnson: If someone removes something that has been certified, that is considered tampering and is subject to civil penalties.

Q: Would fleets be required to replace LRR tires?

Wysor: That is the expectation.

Q: How would you enforce this?

Wysor: It’s the law.

Q: Why would you put small manufacturers at a competitive disadvantage?

Wysor: With other programs over the years, averaging has been generally considered a benefit. This is the first time we have heard that it isn’t. The intent is to provide flexibility. We will have to take a look at this issue if the system really does not work.    ♦