Speed Bumps Ahead

By Thomas Jelenić, Vice President, Pacific Merchant Shipping Association

We continue to race towards a zero-emissions future. Its inevitability is matched only by the utter state of unpreparedness that is being exhibited. While the pressures of the pandemic continue to stretch and contort the supply chain, the emerging speed bumps that are appearing on the road are large enough to cause serious damage to our economy and supply chain. Yet, the sense put forward by leaders is not that there are real issues, but that stakeholders don’t “want it” strongly enough – we only need to re-commit ourselves to reach our goals despite the concerns of naysayers. Unfortunately, wishful thinking will not remove the obstacles.

The first speed bump is the final phase-in for the Bus and Truck Rule at the end of the year. Come January 1st, all trucks that are older than model year 2010 will be banned from service in California. For the San Pedro Bay Ports, that population of trucks moves approximately 30% of containerized cargo from the ports. This rule has more than a pre-pandemic decade of implementation behind it. So, in normal circumstances this final phase-in would be worthy of no more than a shrug of the shoulders. But the wide-ranging impacts of the pandemic is upending what should be the final phase of a well-planned-for rule. The pandemic has sent used truck prices soaring (much like cars). The business model of port drayage is based on deploying used trucks into service. Now that used truck prices look closer to new truck prices, it has the potential to seriously disrupt the replacement cycle within sight of the final regulatory goal. If that portion of the fleet that will be banned next January cannot be replaced, the supply chain will suffer yet another shock. Eventually it should be sorted out, but only after significant pain. The only question will be how much harm is caused during this transition. Worse, policy makers don’t seem to be actively preparing for it. Given government officials’ newly found appreciation for the supply chain, one might think that the possible loss of nearly a third of trucking capacity in nine months’ time would be impetus for action. But you’d be wrong.

The second speed bump on the road to cleaner air provides a confused tangle to what should be a clear regulatory requirement on January 1. The Bus and Truck Rule allows for an extension under the rule if an existing and binding purchase contract experiences a manufacturing delay. A reasonable contingency. Again, the pandemic has caused significant manufacturing delays. The twist is that reporting of the extension does not occur until January 31, 2023 – 30 days after regulatory implementation. In theory, the ports should shut out the pre-2010 trucks at the beginning of the year. But if on January 1st, the California Air Resources Board (CARB) doesn’t know which trucks will have an extension (because it won’t be reported for another 30 days), how will the ports know which trucks to turn away? So far, no one has been able to explain how this will work, with comments ranging from “no idea” to “we’ll figure it out.” The previously described vaporization of the truck fleet on January 1 may not happen. But it must. It has been promised and there will be hell to pay if it doesn’t. We’re just waiting on the how. Luckily, we still have plenty of time and no other supply chain constraints to worry about.

The final bump is the true end goal of zero-emissions (ZE) trucks as represented by the Advanced Clean Fleets (ACF) Rule. As currently proposed by CARB, ACF will require that any truck beginning to serve California ports on or after November 1, 2023, must be zero emissions. While I have deep reservations about the readiness of the ZE trucks to provide routine service to ports, I will focus on infrastructure. That deadline is a mere 20 months from now. When that deadline hits, the electrical and/or hydrogen infrastructure will need to support the natural turnover of trucks on an ongoing basis. Looking at port data covering 2015-2020, between 2,400 and 3,500 trucks were added annually, most of those additions appeared to replace trucks exiting the port drayage fleet. If that continues, infrastructure needs to support hundreds of new trucks every month beginning November 1, 2023. Currently, except for a smattering of demonstration efforts, there is zero infrastructure available. Zero. Better yet, in a recent CARB workshop on infrastructure deployment for medium and heavy-duty equipment, the Los Angeles Department of Water and Power said that for significant installations of electric charging equipment (the sort that will be needed to support hundreds of trucks added monthly), the typical lead time is 24 months. But the rule begins in 20 months. While supply chain stakeholders and regulators should take seriously the loss of 30% of the drayage fleet at the end of this year, the impact of ACF is scarier. In theory and at some price, other existing trucks already on the road can backfill the loss of pre-2010 trucks following January 1. Will it happen? Don’t know. Will it be too expensive to justify? Possibly. But come November 1, 2023, the fleet will become static, begin to shrink through natural attrition, and no amount of funding will fix the problem because the infrastructure will not exist. California has already passed the deadline for ensuring sufficient infrastructure is in place to support transportation electrification. The only question is whether we will collectively continue to ignore it to the peril of California’s supply chain.