Bulldozer Owners Say Rule Could Be Stimulus Roadblock

By Cindy Skrycki
Tuesday, January 20, 2009

It's one thing for Barack Obama to begin his presidency with a call to rebuild the economy. It's another to get the bulldozers moving.

About $30 billion of Obama's $825 billion economic stimulus plan is being set aside for highways and bridges. Some of that money would be squandered unless the new president blocks a rule that might keep some earthmovers from doing their economy-lifting work, a group of contractors says.

The Associated General Contractors of America wants Obama to put up a federal barrier to a California clean-air rule that regulates off-road diesel engines already in use. It will require the replacement or retrofitting of the engines of earthmoving equipment. The state has an estimated 180,000 loaders, graders, excavators and other heavy equipment.

"What is the point of stimulus money if it's used to replace equipment instead of building?" asked Mike Kennedy, general counsel of the Arlington-based group. The regulators "assumed costs could be passed along, but economic circumstances have changed so dramatically that the rule has to be reopened."

This high-stakes clash between environmental and economic interests is an example of the kind of regulatory decisions the new administration will have to make. The 33,000-member contractors' trade group petitioned California last month to amend or repeal the rule and asked the Environmental Protection Agency not to approve the waiver the state needs to enforce it.

During the presidential campaign, Obama promised to quickly approve a U.S. waiver for another hotly debated California air standard -- on auto emissions. The Bush administration recently postponed higher auto-mileage standards, citing the industry's financial troubles.

The EPA is still reviewing the waiver for existing diesel engines, said Cathy Milbourn, an agency spokeswoman. Another federal rule already requires emission controls from new off-road diesel equipment.

The California Air Resources Board's diesel standard starts phasing in by March 2010 and is estimated to cost equipment owners $3.4 billion. The board estimates the savings in health costs from fewer illnesses and deaths at $18 billion to $26 billion over 20 years.

Kennedy of the contractors' group said the compliance date is forcing companies to plan next year's expenditures for equipment purchases at a time when they are underbidding on jobs and revenue is tight. He said the rule's deadlines "are coercing contractors to spend money" on equipment.

While it's likely that California will get the federal approval for its off-road program, everyone agrees it couldn't come at a worse time.

When the regulation was completed, home-building was booming in California and state regulators assumed the cost of the rule would be passed on to customers.

Not now, said Gary Rohman, vice president of Ecco Equipment Corp., in Santa Ana, Calif., which has one of the largest construction-equipment rental fleets west of the Rockies.

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