Volkswagen Consent Decree: Environmental Mitigation Trust The Airlines Perspective. Veronica Bradley, Manager, Environmental Affairs March 28, 2017

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1 Volkswagen Consent Decree: Environmental Mitigation Trust The Airlines Perspective Veronica Bradley, Manager, Environmental Affairs March 28, 2017

2 Background» Consent Decrees settle litigation with United States and California against VW stemming from the use of defeat devices in certain vehicles» Consent Decrees establish mechanisms to address NOx pollution damage from use of defeat devices in certain vehicles Vehicle Recall and Emissions Modification Programs for 2.0L and 3.0L Vehicles Zero Emission Vehicle (ZEV) Investment Commitment Mitigation of Excess Emissions: $2.925 Billion Mitigation Trust» Environmental Mitigation Trust provides funding for 10 Eligible Mitigation Actions (EMAs) 1. Class 8 Local Freight Trucks and Port Drayage Trucks 2. Class 4 8 School Buses, Shuttle Buses, or Transit Buses 3. Freight Switchers 4. Ferries/Tugs 5. Ocean Going Vessels Shorepower 6. Class 4 7 Local Freight Trucks 7. Airport Ground Support Equipment 8. Forklifts and Port Cargo Handling Equipment 9. Light Duty Zero Emission Vehicle Supply Equipment 10. Diesel Emission Reduction Act (DERA) Option March 28, 2017

3 Eligible Mitigation Actions of Interest to Airlines Airport Ground Support Equipment» Eligible Equipment used at an airport to service aircraft between flights Diesel engines: Tier 0, Tier 1, or Tier 2 Large Spark Ignition engines: uncertified or certified to 3 g/bhp-hr» EMA Requirements (1) Repower with all-electric engine OR (2) Replace with same GSE in all-electric form all-electric means powered exclusively by electricity provided by a battery, fuel cell, or the grid Eligible GSE must be scrapped scrapped means rendered inoperable and available for recycle Minimum: 3 hole cut into engine block; vehicle frame rails cut completely in half» Funding available for installation of all-electric engines, new all-electric GSE, and associated charging infrastructure Up to 75% of cost if non-government owned GSE Up to 100% of cost if government owned GSE

4 Eligible Mitigation Actions of Interest to Airlines (continued) Forklifts (and Port Cargo Handling Equipment)» Eligible Equipment Forklifts with >8000 lbs. lift capacity Forklift means nonroad equipment used to lift and move materials short distances; generally includes tines to lift object. Eligible types of forklifts include reach stackers, side loaders, and top loaders.» EMA Requirements (1) Repower with all-electric engine OR (2) Replace with same in all-electric form all-electric means powered exclusively by electricity provided by a battery, fuel cell, or the grid Eligible forklifts must be scrapped scrapped means rendered inoperable and available for recycle Minimum: 3 hole cut into engine block; vehicle frame rails cut completely in half» Funding available for installation of all-electric engines, new all-electric GSE, and associated charging infrastructure Up to 75% of the cost if non-government owned GSE Up to 100% of the cost if government owned GSE

5 Funding Timeline» Filing of the Executed Trust Agreement TED: To Be Determined This marks the Trust Effective Date (TED) from which all deadlines flow.» States/Tribes/DC/PR request Beneficiary status: within 60 days of TED» Beneficiaries submit Beneficiary Mitigation Plans: within 90 days of TED» Trustee files list of Beneficiaries and designated lead agencies with district court: within 120 days of TED» Beneficiaries may submit Requests for Funding at any time Trustee must respond within 60 days of a Request and must begin disbursing funds within 15 days of approving a Request Note this process therefore has two layers: (1) approval of project by the Beneficiary so that Beneficiary makes Request, and (2) approval of the Beneficiary s Request by the Trustee» Funds available for projects: 10* years * Beneficiaries have 10 years to spend allocated trust funds. At the end of 10 years, unused trust funds will be redistributed as supplemental funding among those Beneficiaries who have used at least 80% of their allocated funds. These Beneficiaries will be given an additional 5-year period to use the supplemental funding.

6 Likely Proposal Requirements» Process and requirements for project proposals will vary by Beneficiary» BUT at a minimum, Beneficiaries will likely require the following information*: 1. Explanation of how request fits into Mitigation Plan 2. Detailed description including community and air quality benefits 3. Estimate of anticipated NOx reductions 4. Project management plan including detailed budget and timeline 5. Certification vendors selected in accordance with State law 6. Detailed cost estimates from vendors for expenditures >$25, Oversight plan including identification of government entity responsible for auditing expenditures, commitment to make documents supporting request and expenditures public 8. Description of any cost share requirement 9. Description of mitigation of NOx impacts on communities disproportionately impacted by air pollution 10. Detailed implementation plan * These elements are required to be included in any Request for Funding to the Trustee; therefore, it is likely that Beneficiaries will request this information in project proposals to in turn inform their Requests.

7 Airport-Airline Collaboration Airline Considerations» The Equipment Reliable electric-equivalents (e.g., cargo tractors, belt loaders, utility lifts) Older and highly utilized (i.e., major hubs)» The Airport Shows interest and has sufficient electrical capacity Already has charging infrastructure (even if not a major hub) Commits to installing charging stations (where applicable) Is willing to work one-on-one with airport (waiting on other carriers commitments can frustrate the process)» The Region States with higher GSE funding available Warmer climates to avoid potential battery performance issues Cities that need help in meeting SIP requirements Where electricity is relatively cheap Bottom line: Airlines prefer to convert to cost-effective, reliable, all-electric GSE because it benefits the environment and can save on maintenance and fuel costs

8 Airport-Airline Collaboration Airports and Airlines need to:» Collaborate Project proposals will often require airports and airlines to come together to determine the arrangements necessary to execute infrastructure/equipment» Ensure proposals are high quality and cost-effective This is going to be an extremely competitive process: 10 different Eligible Mitigation Actions; state priorities; emphasis on environmental justice communities A4A is:» Working to put key predicates in place Encouraging States to become Beneficiaries & include GSE in their Beneficiary Mitigation Plans Coordinating with FAA and State Aviation Officials to increase advocacy» Identifying lead agencies and directing advocacy efforts to show GSE is a good expenditure of their funds» Tracking individual State developments» Commenting on draft Beneficiary Mitigation Plans

9 Next Steps More advocacy does not hurt» Find your state s VW Environmental Mitigation Trust website to find out where your state is in the Beneficiary Mitigation Plan process» Reach out to your state s Aviation Office and Environmental Office to express interest Open up dialogue to begin planning» Begin reaching out to your airlines corporate project leads, not just local managers» If you are not sure who to reach out to, reach out to Melinda Pagliarello A4A and ACI-NA are coordinating efforts and gathering contact information to facilitate your coordination Take advantage of this down time by assessing what needs to happen to turn your project into a high-quality, cost-effective proposal» Ask you energy provider for an energy audit to ensure sufficient electrical capacity» Consider creating VALE application in parallel

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