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Corporate Credit Rating for the Tractor Supply Company document sample
Los Angeles Transportation Club May 12, 2008 Patty Senecal International Warehouse Logistics Association California Government Affairs firstname.lastname@example.org www.iwla.com Goods Movement Southern California: • Largest port complex in North America – San Pedro Bay Port Complex with deep water • Largest intermodal rail facility in North American – BNSF Hobart /710 Fwy. •Air Cargo from LAX and Ontario •FedEx Oakland hub, UPS Ontario hub •Strong capacity for intra and interstate trucks •Intermodal trucks 14,500 LA/LB ports, 3,000 Oakland •Warehousing: - Southern California is the largest industrial sector in the U.s. with 1.5 billion sq.ft. of warehouse distribution in our 5 county region (LA, Orange, Riverside, San Bernardino, Ventura). In the next 6 months in the same 5 county region there is another 40 million sq.ft. of inventory empty building and /or finished product coming on-line. Based on historical absorption rate of 5 million sq.ft. a year this means we could have an 8 year inventory of space. •Population growth and 8th largest GDP California Global Warming Solutions Act of 2006 Greenhouse Gases (GHG) AB 32 (Nunez and Pavley) • California is 12th largest emitter of carbon in the world despite leading the nation in energy efficiency standards and lead role in protecting its environment. • AB 32 Established first-in-world regulatory and market mechanisms to achieve ―real, quantifiable, cost-effective reductions of GHG‖ • California is FIRST state to formally approve a comprehensive GHG plan that is required under statue and involves every sector of the economy •AB 32 requires California Air Resources Board (CARB) to: •Develop regulations to reduce Statewide GHG emissions to •2000 levels by 2010 •1990 levels by 2020 – 25% reduction •80 percent by 2050 No discrimination – goods movement, construction, agricultural, cities, school, public agencies (Caltrans)…. The proposed ‗scoping plan‘ was released on October 15, 2008 and approved at the CARB Board hearing on December 12, 2008 •The scoping plan contains the main strategies California will use to reduce the greenhouse gases (GHG): •Reduce vehicle miles traveled (land use) •Vehicle fuel efficiency (Pavley regulations) •Fuel GHG intensity (LCFS) (gasoline & diesel) •Directs CARB to consider initiating a regulatory proceedings to establish and implement the LCFS. In response, ARB identified the LCFS as an early action item with a regulation to be adopted and implemented by 2010. •CARB adopted on April 24, 2009 •The scoping plan has a range of GHG reduction actions which include direct regulations, alternative compliance mechanisms, monetary and non-monetary incentives, voluntary actions, market-based mechanisms such as a cap-and-trade system, and an AB 32 cost of implementation fee regulation to fund the program. •85% of states emissions are covered in cap-and-trade •Program developed in conjunction with the Western Climate Initiative •Clean car standards, increase in cleaner/renewable energy, solar, low carbon fuel •Under development detailed strategies to implement by 2012 •Cost impacts of the AB 32 scoping plan which CARB‟s own analysis concluded Scoping Plan- Key Elements > Expanding and strengthening existing energy efficiency programs as well as building and appliance standards > Achieving a statewide 33% renewable fuel mix > Develop cap/trade that links with western states > Establish regional targets for transportation related GHG emissions and pursue policies and incentives to achieve targets > Adopt measures pursuant to existing state laws: Clean Car standards Goods movement measures Low carbon fuel standard Aerodynamic truck retrofits > Create targeted fees to fund the program Source: California Air Resource Board Transportation Policy Aggressive Cap & Trade System GHG emissions charged to polluter Technologies would have to meet: Rigors of the market CO2 engine standards Café standards Ratcheted down caps imposed annually The amount of allowances (permission/permit to pollute a tonne) issued will decrease every year. 100% auction will generate billions of dollars that we can invest in solar, wind, geothermal and biodiesel Revenue is produced through an auction where there are more polluters than allowances/permits available Logistics in a carbon constrained world! As climate change gathers momentum, the responses of governments and the markets will all converge to fundamentally reshape logistics operations Emissions from freight: • The direct emissions of logistics are generated by the use of fuel in trucks, light commercial vehicles, rail, costal shipping, international ships and airplanes. Another source of direct freight emissions are from air conditioning and refrigeration units used in vehicles, warehouses, and distribution centers. • Indirect freight emissions include those associated with electricity use in warehouses, distribution centers and corporate facilities such as office buildings. • For warehouses, distribution centers, and corporate offices this will involve maximizing the energy and water efficiency of individual facilities. • For freight transport this will involve modal switching where possible, fuel switching where possible, and maximizing the fuel efficiency of vehicle fleets • Primary production industries will experience challenges in the future as a result of climate change, water supply and other environmental impacts that may lead to changes in production. CA CARB ON-ROAD HEAVY-DUTY DIESEL VEHICLES (IN-USE) REGULATION Bus and Truck Rule (private fleet rule) http://www.arb.ca.gov/msprog/onrdiesel/onrdiesel.htm •December 12, 2008, CARB approved a new regulation to significantly reduce emissions from existing on-road diesel vehicles operating in California. •The regulation requires affected trucks and buses to meet performance requirements between 2011 and 2023. •By 12/31/2010 pre 1994 engines must be retrofitted with highest PM controls •By 1/31/2014 pre 1994 engines must be retrofitted with NOx BACT standard •By January 1, 2023 all vehicles must have a 2010 model year engine or equivalent. •Affected vehicles include on-road heavy-duty diesel fueled vehicles with a gross vehicle weight rating (GVWR) greater than 14,000 pounds, yard trucks with off-road certified engines, and diesel fueled shuttle vehicles of any GVWR. •Out-of-state trucks and buses that operate in California are also subject to the regulation. Who must comply with the regulation? Any person, business, school district, or federal government agency that owns, operates, leases or rents affected vehicles. The regulation also establishes requirements for any in-state or out-of-state motor carrier, California- based broker, or any California resident who hires or dispatches vehicles subject to the regulation. In addition, California sellers of a vehicle subject to the regulation would have to disclose the regulation‟s potential applicability to buyers of the vehicles. When does the regulation take effect? •For most fleets, the first performance requirements for PM do not begin until January 1, 2011,followed by engine replacement requirements to reduce NOx emissions starting January 1, 2013. •For fleets with three or fewer affected vehicles, none of the performance requirements begin until January 1, 2014. •The regulation is phased in such that by January 1, 2023, all vehicles must have a 2010 model year engine or equivalent. Fleet calculator: http://www.arb.ca.gov/msprog/onrdiesel/calculators.htm The calculator is an Excel file designed to assist fleet owners in determining the yearly compliance and to help fleet owners plan for the coming years utilizing various compliance options available in the regulation. The updated version includes the changes approved by the Board on December 12, 2008 and additional proposed changes. CA CARB Drayage Truck Program (port & rail): Approved 12 -24-2008 http://www.arb.ca.gov/msprog/onroad/porttruck/porttruck.htm http://www.arb.ca.gov/msprog/onroad/porttruck/finaldrayagereg.pdf •This regulation applies to owners and operators of on-road diesel-fueled heavy-duty drayage trucks operated at California ports and intermodal rail yard facilities. •This regulation also applies to “motor carriers,” “marine or port terminals,” “intermodal rail yards,” and “rail yard and port authorities“. •Intermodal Rail Yard” is any rail facility owned or operated by a Class I railroad where cargo is transferred from drayage truck to train or vice versa that: is within 80 miles of a port; or, is located more than 80 miles from the nearest port and having, on or after January 2008, 100 or more average daily drayage truck visits in any one calendar month. •Intermodal rail yards include, but are not limited to, the following facilities: Union Pacific (UP) Oakland, Burlington Northern Santa Fe (BNSF) Hobart, LATC Union Pacific, Commerce UP, Richmond BNSF, Commerce Eastern BNSF, ICTF UP, San Bernardino, Stockton Intermodal BNSF, Lathrop Intermodal UP, and BNSF Oakland. Drayage Truck Program Requirements and Compliance Deadlines: •Drayage trucks subject to this regulation must meet the following requirements by the compliance deadlines detailed in both Phase 1 and Phase 2. Phase 1: By December 31, 2009, trucks must be equipped with: (A) 1994 – 2003 model year engine certified to California or federal emission standards and a level 3 VDECS for PM emissions; or, (B) 2004 or newer model year engine certified to California or federal emission standards; or, (C) a 1994 or newer model year engine that meets or exceeds 2007 model year California or federal emission standards. Phase 2: After December 31, 2013, all drayage trucks must be equipped with a 1994 or newer model year engine that meets or exceeds 2007 model year California or federal emission standards. All drayage trucks must be registered with the DTR by the end of September 2009. Additionally, both the DTR registration and truck labels are free of charge (labels are optional). http://www.arb.ca.gov/msprog/onroad/porttruck/porttruck.htm 2007 Ports of Los Angeles and Long Beach Clean Truck Program (CTP) Clean Truck Program (CTP) vs. CARB Port Drayage Rule: •January 1, 2010 •CARB bans pre-1994; retrofit 1994-2002 •CTP bans pre-1996; no retrofit requirements for 1996-2002 •January 1,2020 •CARB replace 2003-2006 with 2010 trucks •CTP no similar requirement http://www.polb.com/environment/cleantrucks/default.asp http://www.portoflosangeles.org/environment/ctp.asp Post 2011 LA/LB port requirements – CARB private fleet rule? Litigation from American Trucking Association is about the Concession Contract; not the rolling truck bans or truck fees. CA CARB GREENHOUSE GAS EMISSIONS FROM HEAVY-DUTY VEHICLES REGULATION: http://www.arb.ca.gov/regact/2008/ghghdv08/ghghdv08.htm STAFF REPORT: INITIAL STATEMENT OF REASONS FOR PROPOSED RULEMAKING CARB Board approved in December 2008 Applicability: • Long-haul tractors pulling 53‟ or longer box-type trailers 53‟ or longer • Box-type trailers (dry-van and refrigerated-van trailers) pulled by long haul tractors PUBLIC HEARING TO CONSIDER ADOPTION OF THE REGULATION • Responsible for compliance – owner, driver, TO REDUCE GREENHOUSE GAS EMISSIONS FROM HEAVY-DUTY VEHICLES motor carrier, California-based broker, and California-based shipper Mobile Source Control Division Emission Research and Regulatory Development Branch • Implementation begins in 2010 October 2008 Exemptions: Short-haul tractors & trailers 100 mile radius 50,000 miles per year or less (tractors only) Drayage tractors & trailers Operate 100 mile radius of port or intermodal rail yard Container chassis Drop frame vans Curtain side vans Authorized emergency vehicles GREENHOUSE GAS EMISSIONS FROM HEAVY-DUTY VEHICLES REGULATION: Reduce GHG emissions from long-haul tractors by reducing Tractor & trailer aerodynamic drag and Tire rolling resistance Tractor aerodynamics Streamlined hood, sleeper cab roof fairings, gap fairings, fuel tank fairings, aerodynamic bumper and mirrors Trailer aerodynamics Side skirts, front gap fairings, rear trailer fairings Low rolling resistance tires Both tractors & trailers Integrated roof fairing Aerodynamic mirrors Aero profile tractor Cab side gap fairings Aerodynamic bumper Side Skirts Front Trailer Gap Fairings 18 Fuel-tank skirts Tractor Requirements: 2011+ model year sleeper-cab tractors that are SmartWay certified January 1, 2010 2011+ model year day-cab tractors that have SmartWay verified low rolling resistance tires January 1, 2010 All pre-2011 MY sleeper-cab and day-cab tractors have SmartWay verified low rolling resistance tires Trailer Requirements: 2011+ model year 53-foot or longer box-type SmartWay certified or Retrofitted with SmartWay technologies: • Low rolling resistance tires • Minimum of 1.5% fuel efficiency improvement • Aerodynamic devices • Minimum of 5% fuel efficiency improvement for a dry van, and • Minimum of 4% fuel efficiency improvement for a refrigerated van 19 Refrigerated Van and Dry Van Optional Phase-In Compliance Schedules - 2010 and Older MY Trailers - Refrigerated van – 2003-2008 model year Phase-in: 2017 – 2019 Other Refrigerated and Dry vans Small fleet – 20 or less trailers Phase-in: 2013 - 2016 Large fleet – 21 or more trailers Phase-in: 2010 - 2015 Early compliance credit 20 GREENHOUSE GAS EMISSIONS FROM HEAVY-DUTY VEHICLES REGULATION: CARB Enforcement Strategy for California Shippers and Brokers California shippers and brokers notified when a notice of violation (NOV) has been issued to a non-compliant truck transporting their goods Notice Of Violation (NOV) will be issued to owner, driver, and motor carrier found in violation – NOT TO THE SHIPPER OR BROKER If NOV not settled, and shipper or broker continues to use delinquent owner or motor carrier, shipper or broker may be subject to NOV if: • Shipper or broker has not taken proactive steps working with ARB, owners, and/or motor carriers to ensure goods are shipped in compliant tractors and trailers, and • Shipper continues to load freight onto non-compliant trailers owned/dispatched by delinquent owners/motor carriers CA CARB Large Spark Ignition (LSI) –Off Road (gasoline and liquefied petroleum gas) http://www.arb.ca.gov/msprog/offroad/orspark/orspark.htm http://www.arb.ca.gov/msprog/offroad/orspark/background.htm http://www.arb.ca.gov/msprog/moyer/guidelines/2008green_charts/lsi.pdf Large Spark Ignition (LSI) –Off Road Rule: •The regulation established more stringent hydrocarbon and oxides of nitrogen emission certification standards for engine manufactures. •Individual persons, business and government agencies that own or operate LSI engine-powered fleets in California are subject to the fleet requirement •The LIS engines include forklifts, portable generators, sweeper /scrubbers, and an array of agricultural, construction and general industrial equipment. The regulation requires engine and retrofit emission control systems. •Regulation established feet average emission level requirements for medium and large fleets that start January 1, 2009 and become more stringent with time to January 1, 2010. New Engine Standards and Test Procedures – 2.0 g/bhp-hr in 2007; 0.6 g/bhp-hr in 2010 – 95 percent emission reduction vs. uncontrolled Retrofit Kit Verification Procedures Fleet Average Requirements Applicability – 4 or more forklifts, tow tractors, sweeper/scrubbers, or pieces of airport ground support equipment (Fleet Average Emission Level in Grams HC+NOx) LSI Fleet Type Number of units By 1/1/2009 By 1/1/2011 By 1/1/2013 Large fleet – forklift 26 + 2.4 1.7 1.1 component Mid-size fleet – forklift 4-25 2.6 2.0 1.4 component Non-forklift fleet N/A 3.0 2.7 2.5 Third-party fleet average calculators – Pape Material Handling: http://www.papemh.com/carb.aspx – Raymond Handling Solutions: http://www.raymondhandlingsolutions.com/Emissions_calculator.html Exemptions – Construction and farm equipment greater than 175 hp – Small fleets – Uncontrolled 2003 & 2004 LSI engines through 2010 Exclusions – Limited hours of use (250 or less) – Rented 30 or fewer calendar days per year – Rental or lease less than one year, provided: • no more than 20 percent of fleet, and • meets standards (3.0 in „09; 2.0 in ‟11) Recordkeeping and Reporting Requirements: •The LSI regulation has no reporting requirement. •Operators must maintain records • A baseline inventory due November 12, 2007 • Contents: equipment/engine make, model, SN, certification or verification level as demonstrated by a label • Propane fuel quality receipts if available •Records retained through December 31, 2015; fuel quality records retained for three years. Enforcement: Performed by ARB and local air districts ARB recently hired additional enforcement staff and conducted in conjunction with other inspections In-use off-road diesel regulation Cargo handling equipment regulation Other mobile and stationary source regulations Penalty Maximum of $500 per day per piece of equipment Low Carbon Fuel Standard for California April 23, 2009 CARB Board adopts regulation to implement the LCFS. The LCFS is intended to reduce, on a full-fuel, life-cycle basis, the carbon intensity of transportation fuels (gasoline & diesel) used in California. Reformulation starts 2011 – finished by 2020 Low Carbon Fuel is complicated – ‗life cycle analysis‘ CARBOB (CA gasoline blend stock), CARFG (CA reformulated gasoline, ULSD (CA ultra low sulfur diesel), corn ethanol, sugarcane ethanol from Brazil, Cellulosic ethanol (farmed trees), cellulosic ethanol (forest waste), biodiesel (soybean), renewable diesel (soybean), compressed natural gas (CNG from North America natural gas), landfill gas to CNG, electricity(CA mix), hydrogen (gaseous hydrogen from North American natural gas) Vehicle Facility Fabrication Manufacturing Vehicle Resource Initial Transport Fuel Distribution Operation Extractio Processin Productio & Marketing n g n Facility Vehicle Recycling Decommissioning Western States Petroleum Association Supply and Demand - California California consumes 44 to 45 million gallons of gasoline and 10 million gallons of diesel fuel per day Demand for transportation fuels increased nearly 50% in last 20 years Number of refineries producing gasoline in California dropped from 32 in mid-1980s to 14 today California imports 3.5+ million gallons of gasoline and components per day Transportation fuel infrastructure is at capacity and not keeping up with rapidly growing population and demand Source: California Energy Commission CARB – next phase! May 21, 2009 CARB public workshop to discuss T-6 Goods Movement Efficiency Measures (also referred to as Freight Transport Efficiency Measures) The purpose of the workshop is to discuss the development of measures to reduce the carbon footprint of freight transport. Intersection of supply chain efficiency and carbon footprint • Sustainability and green supply chain initiatives are rapidly moving to top priority positions at many companies…. Lack of credit in today economy. • Market research firm eyefortransport (www.eyefortransport.com) has conducted surveys on the greening of transportation and determined that this is definitely an area growing in significance. • 75% of a company's carbon footprint is related to transportation and logistics activities • Eyefortransport found that 69% of companies feel that green issues will be increasing over the next three years, and that 9% of companies feel it will be their top priority. Of these companies, 42% plan to use vehicle routing and optimization tools to help drive green supply chain initiatives. This number is sure to grow as the issue of greening grows. • Does Green – Green? Intersection of supply chain efficiency to reduce costs and make a company more agile and demand driven, it will also help green your supply chain. Will operational efficiencies safeguard existing margins against rising costs but will also reduce the emissions intensity of operations. MeTrIS: Maps, Analyses, Models • Components of MeTrIS for freight congestion mitigation are being developed in a project funded by the U.S. Department of Transportation—Research and Innovative Technology Administration, at the University of California, Santa Barbara. • Research MeTrIS envisages extensive tracking of transportation assets using Global Positioning Systems (GPS) and Vehicle-Infrastructure Integration (VII) technologies. Vehicles report their location and attributes in real time. Sensors in infrastructure simultaneously report environmental conditions such as bridge ice or fog. The rich data stream from these sensors enables a variety of synoptic information products, both real- time and longitudinal. http://www.metris.us/ • The system extends beyond what is currently deployed by private logistics- oriented tracking firms, and focuses on analyses and models that employ the data for broad public benefit—in particular, strategic transportation planning, tactical operational efficiencies such as intermodal synchronization and identification of avoidable trips, and security. • MeTrIS technologies promise a future where policy and operational decisions are based on reliable information and verifiable forecasts, and therefore provide solutions that are financially sound, logistically efficient, environmentally beneficial, and equitable to the communities and motor carriers affected. MeTrIS: Maps, Analyses, Models • Maps • First snapshots of drayage in LA • Origins, destinations, routes, stops, time of day • Congestion hot spots by time of day • Analyses • Terminal turn time by time of day • Highway speed by time of day • Highway ―drainage‖ (useful to planners) • Drivers‘ working hours, idle time Models • Deadhead reduction • Strategically placed container depots • Different operating scenarios • Up to 25% reduction in traffic Port sync • Give terminals precise information on truck arrival • 25-50% reduction in stack rehandling Interface of „smart truck‟ to real-time road San Pedro Bay Port Complex way and distribution center Logistics in a carbon constrained world! . Federal / Waxman legislation: Mitigation of global warming and protection of individual House members who want to protect their own backyard industries. • The challenges of managing strong population growth, supporting a changing economic base, making the shift to a low carbon economy and managing the growing freight task itself. • Goods Movement / transport companies are simultaneously exposed to demand risk, regulatory risk, increasing cost structures, operational disruptions risk, and broader market risks. • The exposure of all freight transport and warehousing to increases in both fuel and electricity costs will profit margins be eroded? More companies or less? • The freight business is highly competitive with tight margins and a mix of small operators and large vertically integrated enterprises. These businesses will naturally tend to focus on the commercial implications for their own operations on particular parts of the network. How can the Future of Freight move beyond individual interests and provide a balanced plan of action in the interests of the freight network and the state as a whole? Cap and Trade 101: Source: January 16, 2008 Center for American Progress www.americanprogress.org/issues/2008/01/capandtrade101.html The goal: To steadily reduce carbon dioxide and other greenhouse gas emissions economy-wide in a cost-effective manner. The cap: Each large-scale emitter, or company, will have a limit on the amount of greenhouse gas that it can emit. The firm must have an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable limit, or cap, on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits become stricter, allowing less and less pollution, until the ultimate reduction goal is met. This is similar to the cap and trade program enacted by the Clean Air Act of 1990, which reduced the sulfur emissions that cause acid rain, and it met the goals at a much lower cost than industry or government predicted. The trade: It will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. These more efficient companies, who emit less than their allowance, can sell their extra permits to companies that are not able to make reductions as easily. This creates a system that guarantees a set level of overall reductions, while rewarding the most efficient companies and ensuring that the cap can be met at the lowest possible cost to the economy. The profits: If the federal government auctions the emissions permits to the companies required to reduce their emissions, it would create a large and dependable revenue stream. These financial resources could be used to achieve critical public policy objectives related to climate change mitigation and economic development. The federal government can also choose to “grandfather” allowances to the polluting firms by handing them out free based on historic or projected emissions. This would give the most benefits to those companies with higher baseline emissions that have historically done the least to reduce their pollution. What Would a Successful Cap-and-Trade Program Look Like? The goal: To limit the rise in global temperature to approximately 2.0 degrees Celsius (3.6 degrees Fahrenheit) above pre-industrial levels by 2050 by reducing carbon dioxide and other emissions from companies as part of a larger plan for curbing global warming. The cap: To achieve this goal, the U.S. government should steadily tighten the cap until emissions are reduced to 80 percent below 1990 levels by 2050. Businesses would have to obtain permits entitling them to emit a certain quantity of carbon dioxide or its equivalent in other greenhouse gases. All permits would be auctioned off by the government. Emissions permits in the near term would likely fall in the range of $10 to $15 per metric ton of carbon dioxide or its equivalent. The trade: Companies unable to meet their emissions quotas could purchase allowances from other companies that have acquired more permits than they need to account for their emissions. The cost of buying and selling these credits would be determined by the marketplace, which over time would reduce the cost of trading the credits as trading becomes more widespread and efficient. The profits: Initial estimates by the Congressional Budget Office project that an economy-wide cap-and-trade program would generate at least $50 billion per year, but could reach up to $300 billion. Approximately 10 percent of this revenue should be allocated to help offset costs to businesses and shareholders of affected industries. Of the remaining revenue, approximately half should be devoted to help offset any energy price increases for low- and middle-income Americans that may occur as a result of the transition to more efficient energy sources. The other half of the remaining revenue should be used to invest in renewable energy, efficiency, low-carbon transportation technologies, green-collar job training, and the transition to a low-carbon economy. Some resources should also be invested in the energy, environment, and infrastructure sectors in developing nations to alleviate energy poverty with low-carbon energy systems and help these nations adapt to the inevitable effects of global warming. Revenues from the permit auction would essentially be ―recycled‖ back into the economy to facilitate the transition to an efficient, low-carbon energy economy and ensure that consumers are not unduly burdened by potentially higher energy costs. Thank You! Patty Senecal, California Government Affairs International Warehouse Logistics Association 310-678-7782 email@example.com
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