Matt Schrap, CEO of California’s Harbor Trucking Association (HTA), is on the front line of the State’s attempt to introduce a zero emission rule for trucks in 2024…a rule with implementation less than two months away.
On October 17th, the California Trucking Association (CTA) filed a federal lawsuit seeking to block enforcement of the California Air Resources Board’s Advanced Clean Fleets regulation that would require motor carriers operating in the state to transition their trucks to zero-emission vehicles beginning as soon as next year.
In a note to its members, CTA CEO Eric Sauer said the lawsuit is aimed at federal law violations, including conflicts with the Federal Clean Air Act and the Federal Aviation Administration Authorization Act of 1994.
In an interview with AJOT, Matt Schrap, CEO for the Harbor Trucking Association (HTA), supports the lawsuit and warns that the new California zero emission rule will prevent truckers from buying new trucks with internal combustion engines by January 1, 2024.
CTA Lawsuit Could Delay New Rule Implementation
Schrap told AJOT that the California Trucking Association lawsuit could stop implementation of the new rules: “The California Trucking Association filed their complaint against the State of California in which the suit … alleges there's a violation of the Clean Air Act. So, the assertion is that effectively … the CARB (California Air Resources Board) did not follow enough processes … they did not follow all of the processes necessary to have a legal rule based upon the Clean Air Act authority that's been provided to them. They didn't follow the steps… There's all sorts of things that they needed to do that effectively they did not do in putting forth and adopting the Advanced Clean Fleets rule.”
According to the California Air Resources Board website: “The Advanced Clean Fleets (ACF) Regulation is the latest development in CARB’s decadeslong history of setting increasingly stringent emission standards for mobile sources that are needed to protect the public health and welfare of Californians. The ACF Regulation requires fleets that are well suited for electrification to transition to zero-emission vehicles (ZEV) through requirements to both phase-in the use of ZEVs for targeted fleets and requirements that manufacturers only manufacture ZEV trucks starting in the 2036 model year.”
Schrap noted that if the CTA lawsuit fails to win an injunction “then no new diesel or internal combustion (engines) can enter into the drayage statewide” beginning in 2024.
Electric Trucks Not Affordable And Charging Is Limited
Schrap says that today electric trucks are not affordable and truck charging is in limited capacity: “You’re going to need thousands of chargers by 2030 to support the deployment of medium and heavy-duty trucks … 157,000 chargers in 2030. Okay. For you math guys out there, that's like 500 chargers per week that need to be installed, starting with yesterday… to support what the California Energy Commission people, who are supposed to be responsible for the infrastructure, are telling us and the industry. That’s how many chargers we are going to need to deploy.”
In addition, Schrap says “Most of the drayage trucks in this marketplace were purchased on the secondary market. There is no secondary market for zero emissions equipment. And if we're talking about a new (electric) truck that costs $500,000.”
Schrap adds there are programs to help truckers afford the added costs but not enough to offset the huge differential between diesel and electric powered: “Shippers are talking about ESG (Environmental, Social, and Governance used to screen investments based on environmentally responsible criteria). They want zero emission trucks at diesel rates. And that's not sustainable. And so, if we have the industry making all these investments and infrastructure, which is really the problem, people aren't buying electric trucks because … they don't have anywhere to fuel them …. And yes, we're getting all sorts of money that's going towards infrastructure, but we are years away from (a viable zero emission industry) and we're looking at a mandate that starts in eight weeks.”
He adds: “We don't really know what the total operational cost is … no one's been operating these trucks long enough to … say what kind of costs, whether it's cost savings due to maintenance (or) due to fueling costs. I mean, CARB … they're in a fantasy land about what the truck costs … what the fuel is going to cost. They say you can get low carbon fuel credits. Well, not everybody has the ability to leverage the low carbon fuel credits … Also, it depends on when you're charging and how much charging you're doing in order to determine what your kilowatt hour rate is.”
California’s Assembly Bill 5 & Owner Operator Trucking
Another problem facing harbor truckers is the enactment of California Assembly Bill 5 (AB5) which made it very hard for trucking companies to operate with owner operator truckers.
The California Legislative Counsel review of AB 5 states: “Existing law requires a 3-part test, commonly known as the “ABC” test, to establish that a worker is an independent contractor for those purposes.
Existing law, for purposes of unemployment insurance provisions, requires employers to make contributions with respect to unemployment insurance and disability insurance from the wages paid to their employees. Existing law defines “employee” for those purposes to include, among other individuals, any individual who, under the usual common law rules applicable in determining the employer-employee relationship, has the status of an employee.”
Schrap says enforcement is now a problem and companies who have invested in several types of re-organization to comply are finding the new environment challenging: “The State of California is still trying to figure out how to enforce it … we're dealing with the compliance challenges of AB 5 including from … people who are not complying or seemingly not complying to those who have spent all the resources to comply.”
The result of a slowing international trade market compounded by cancelled ocean vessel sailings is causing shippers to push for cost reductions from truckers: “It's like the worst time to be going and buying trucks when interest rates are sky high. That is creating challenges … coupled with a depressive rate environment … shippers are leveraging any savings they can get, and they're looking to drayage providers to help offset some of the cost increases.”
The effect of sailing cancellations means that terminal gates may be shut slowing down the pick-up and delivery of containers: “. You're seeing … full day closures, both shifts and … more blank sailings. That translates into less opportunity for American exporters to get their goods to market because there is … just less slots that are available.”
Other Related Issues
After a major shortage of chassis two years ago, there are now too many chassis: “We're all drowning in chassis now. We're still dealing with the issues of ocean carriers offering either extremely discounted or free, quote unquote … chassis usage for BCOs (beneficial cargo owners) which then requires us to go hunt down (that) chassis.”
Schrap is afraid that smaller family-owned companies will not be able to survive the changes impacting the industry and this will help bigger companies with deeper pockets who can afford the more expensive zero emission trucks and the truck charging.
The result will be bigger companies who can afford employee drivers who will be more susceptible to being organized by the International Brotherhood of Teamsters resulting in a unionized high-cost harbor trucking industry: “So for a small fleet to ... navigate all of these mandates and new fuel types and new trucks and limited range and weight penalties, fueling issues, that is an insurmountable task for a small fleet whose owners might be driving truck and doing payroll … It's a lot to ask … Many people have accused the State of California, of passing these policies to get rid of those small fleets … It provides an opportunity for the large fleets to come in that effectively may become targets of unionization in the future.”
