Focus on Equipment

September/October 2009

Tough Competition

DERA grants offer help with diesel retrofit costs, if companies can find the right public-sector partners

By Bruce Buckley

(Photo Courtesy of Tudor Van Hampton)

Many equipment fleet owners are looking to government assistance programs to fend off potentially onerous expenses that could result from mandates on diesel emissions, but they are finding public handouts are tough to get. With California possibly less than a year from instituting diesel emissions mandates and dozens of states reportedly looking at adopting similar standards, government grants for equipment upgrades have been in high demand.

Under the Diesel Emissions Reduction Act (DERA), grants and loans have been available at the national and government level to help fleet owners who voluntarily repower or retrofit their machines. But once a diesel-emissions mandate takes effect, fleet owners are no longer eligible for assistance.

In 2008, the program provided $50 million in funding, but with the passage of the American Reinvestment and Recovery Act in February, the DERA initiative received a significant boost. The stimulus plan added $156 million of clean-diesel funds to DERA, but only public agencies and nonprofits such as AGC were eligible to apply.

Because private companies could not compete for those funds, 15 AGC chapters nationwide applied on behalf of their members. Despite extensive efforts on the national and local levels to produce compelling proposals, only three AGC chapters earned grants—AGC of Kentucky, AGC of Minnesota and the Constructors Association of Western Pennsylvania.

Leah Pilconis, environmental adviser to AGC, says the success rate of AGC chapters is slightly better than results seen nationwide, demonstrating the high level of competition for funds. Pilconis estimates 32 states are looking at the California emissions targets and considering adopting them as well, prompting companies nationwide to take preemptive efforts.

“In just this round, there were approximately 600 applications asking for more than $1.7 billion,” Pilconis says. “That is all diesel users, not just construction. There is a fierce demand for funds.”

The big winner was Kentucky, earning $2 million from the grant program to retrofit or repower nearly 100 pieces of equipment. Project manager John Brazel says he hopes the chapter’s voluntary approach to reducing emissions such as nitrogen oxides, particulate matter, carbon monoxide and hydrocarbons will send a strong message to lawmakers in Kentucky and other states. “Right now, when you look at the [diesel emission reduction] regulations going on in places like California, you have to realize that those types of mandates can spread,” he says. “We hope these dollars will demonstrate to folks at the state level that the construction industry realizes that it is part of the solution and wants to work in partnership with them as opposed to being hit with a mandate.”

The federal grant program will cover 100% of filter retrofits and 75% of engine repower costs. Brazel expects members to contribute more than $450,000 to cover the unfunded portion of the repowers.

The California Push

Although the need for solutions is most pressing in California, AGC members in the state will not see any of the ARRA funds. Faced with statewide mandates calling for the reduction of higher-emission equipment in large fleets starting in 2010, AGC of California took an aggressive approach. The chapter applied for the maximum $10-million grant, with 13 member companies agreeing to a 50% match.

Those companies also agreed to keep their machines in state for at least five years, participate in biweekly conference calls, complete training and undergo monthly reporting to AGC. Caterpillar, Cummins and John Deere also agreed to offer 20% discounts on retrofits for companies that won grants.

To make sure its proposal was polished, AGC of California hired a proposal writer and sent its completed work to Caterpillar for a thorough review before submittal. “We pulled out all the stops,” says John Hakel, vice president of government relations at AGC of California. “Our members have 1,300 to 1,400 engines that might need to be retired. This could have been a huge boon for us.”

Hakel says that when the awards were announced, private nonprofit groups were left in the dust. Instead, the money went largely to cover government-related fleets.

“We had a debriefing, and they told us our proposal was near perfect,” Hakel says. “They said we should apply again next time around. Our guys need this now. Given the economy, this could not happen at a worse time in California. The timing [of the mandates] is tragic.”

Pennsylvania & Minnesota

Partnering with a government agency proved to be the winning formula for Constructors Association of Western Pennsylvania, which was awarded $925,000 in funds. The association was part of a $3.5-million grant awarded to the Allegheny County Health Dept. Twenty-three pieces of equipment will be affected by the grants, including 14 repowers, to which members will contribute $260,000. “This is an air-quality issue, and the county saw that we were trying to be proactive,” says Jason Koss, director of industry relations at CAWP. “It was the right match.”

AGC of Minnesota partnered with a nonprofit, the Minnesota Environmental Initiative, to author and submit its grant. The chapter requested $5 million and received $3 million, which will go to 11 member companies. David Semerad, CEO and executive director of AGC of Minnesota, says joining forces with an organization that understands grant-proposal writing made all the difference. “It made it a very smooth process,” he says. “They could anticipate the problems we might encounter and help address those from the beginning.”

Working directly with local and state agencies to find funding could prove to be a fruitful solution for more contractors, Pilconis says. She suggests contractors get involved in a clean-diesel collaborative and contact local clean-air agencies to find out if they are considering pursuing a grant. Many states have received DERA funds to distribute, including $1.7 million that every state received in stimulus funds.

“Contractors have some options if they look for them,” Pilconis says. “You can partner with a government agency or a nonprofit. However, many states open funding up directly to private companies. It is a way we can empower private industry to take things into its own hands, assess its own fleets and find solutions.”