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AUGUST 2013 issue of
Rental Management

Cover story: Planning for Tier 4
Cover story: Planning for Tier 4

There are several important issues to consider

Editor’s note: At The Rental Show 2013 in Las Vegas, several manufacturers highlighted their Tier 4 interim and Tier 4 final products, showing a variety of ways to meet regulations that might better fit the needs of the equipment rental industry.

Some have derated the horsepower on certain machines, bringing it under the threshold to meet emissions requirements, while upping the hydraulic power so that the machine is as productive as its higher horsepower predecessor.

Others say they have developed diesel particulate filters that will last the life of the machine, eliminating the need for extra maintenance.

Through it all, however, many in the equipment rental industry remain skeptical. Tier 4 machines will cost more and not all rental stores are confident they can increase rental rates as necessary because demand for Tier 4 equipment has yet to reach their respective markets.

National rental companies are likely to make the transition faster to meet the needs of their national customers who have government jobs that require the use of equipment with less engine emissions. Others in markets where hospitals and other health care facilities are expanding or being built also will likely have customers who require quieter machines with less engine emissions.

For the rest of those in the industry, there currently are more questions than answers. Some in the equipment rental industry are often early adopters of new types of machines that might meet the needs of new market segments, expanding their business into new areas.

However, most are concerned about new engine technologies because of unproven reliability and maintenance needs. That’s why the transition to Tier 4 has many struggling with what to do about their equipment fleets now and for the next few years.

“Our customers are not asking, ‘What Tier is this machine?’ That’s not happening yet unless a contractor is going on a state or government job where they say they have to have this type of equipment. Otherwise, Tier 4 is not bothering us here much yet,” says Roger Vajgrt, owner, Home Rental Center & Sales, Marshalltown, Iowa.

Vajgrt also says things continue to get more confusing and uncertain as manufacturers work to meet the emissions requirements and come up with other alternatives.

“We are a Stihl dealer and they came out with a new line of trimmers. The trimmers run so clean, apparently the company received ‘credits,’ which is allowing them to continue selling models of chain saws for the next three years that we thought were going away,” Vajgrt says.

Many believe the initial impact when the regulations for Tier 4 final go into effect will be negative on the industry. “This causes equipment to be more expensive and when it comes to disposal, no one wants to pay for it. That means rental rates will have to be higher. As a result, people are doing the best they can to defer buying Tier 4 equipment,” says Dan Kaplan, an industry consultant and owner of Daniel Kaplan Associates, Morristown, N.J.

That’s exactly what Paul Phelon, president, Timp Rental Center, Orem, Utah, has been doing for the last two years.

“Manufacturers have been telling me there is an added 5 to 40 percent engine cost for Tier 4 final, so I’ve been buying more equipment than I was planning to at The Rental Show,” Phelon says.

Cost, however, isn’t his only concern. Phelon says he’s also worried about the reliability of new Tier 4 final equipment. “The Tier 4 interim equipment has been a huge improvement and those engines are working very well. I’m also getting better fuel economy and the improved hydraulics means the machines don’t need as much horsepower,” he says.

While manufacturers are working diligently to solve any potential issues Tier 4 final equipment could cause, the machines may require fuel additives, more filters, computer modules and software upgrades, and if those are not maintained, the result could be mechanical failure and downtime, something rental stores want to avoid.

Phelon cites the experience of the trucking industry as a reason to buy more equipment now so that he can delay buying Tier 4 final equipment until “the bugs are worked out.”

“With trucks, when they started adding more emissions controls in 2008 models, people started having issues. The trucks from 2008, 2009 and 2010 all had problems, but the 2011 and 2012 models are OK. The same could happen with construction equipment,” Phelon says.

“I also see the value of used non-Tier 4 equipment going up. A lot of rental companies might go to auctions, buy used equipment and let the fleet age a little longer to get down the road when any Tier 4 problems are resolved,” he says.

Today, more than 28 percent of all trucks registered in the United States — 2.5 million of 8.6 million trucks — are now equipped with advanced new technology clean diesel engines, according to data recently compiled by R.L. Polk and Co. for the Diesel Technology Forum.

Beginning in 2007, all heavy-duty diesel trucks sold had to meet particulate emissions levels of 0.01 grams per brake horsepower hour, a level near zero.

“The fact that more than 28 percent of all trucks on U.S. roads today are new technology diesel engines with near zero emissions is significant for the environment and the trucking industry,” says Allen Schaeffer, the executive director of the Diesel Technology Forum.

The following article by James Waite, former general counsel for RentX, explores the technologies and issues related to Tier 4 to help equipment rental stores plan for the future.


The Environmental Protection Agency (EPA) Tier 4 regulations and European (EU) Stage 4 regulations apply to four major types of pollutant emissions — hydrocarbons (HC), carbon monoxide (CO), particulate matter (PM) and nitrogen oxides (NOx) — and require that manufacturers substantially reduce pollution emissions.

European and American standards have largely been conformed, but the rest of the world remains well behind in terms of pollution regulation and the technologies necessary to achieve compliance with mandated thresholds. China, India, Japan and South Korea, for example, have adopted similar standards in some, albeit more limited, cases.

Tier 4 requirements will not apply to all types of equipment. For example, some mining, marine and railroad engines are excluded, though they are typically covered by other statutes, but the new requirements will apply to virtually every type of diesel engine typically found in the fleets of equipment rental operators throughout the United States and Europe.

The technologies fall into two broad categories:

  • Advanced engine design, for example, using new combustion technologies, intake filtration systems, variable geometry turbochargers, crankcase filters and exhaust gas recirculation systems.
  • Exhaust gas aftertreatment systems, for example, particulate matter filters and selective catalytic reduction systems.

Original equipment manufacturers (OEMs) generally are free to use any combination of technologies they deem appropriate, as long as they meet the applicable emissions standards.

Implementation of the new regulations is ongoing. New diesel engines in the U.S. and Europe are, with some exceptions, subject to at least Tier 4 interim/Stage 3A requirements. In the U.S., Tier 4 final regulations become applicable to the last segment of nonroad diesel engines — 75 to 173 hp — on Jan. 1, 2015, when similar Stage 4 regulations also become effective in Europe for engines over 56 kW (75 hp).

One of the chief main concerns for most equipment rental companies is cost. Manufacturers have estimated the cost increase at between 2 and 7 percent of the total purchase price of a given machine. That means an average medium-to-large piece of equipment could cost roughly $7,000 more, but those are current estimates and actual costs could be much higher.

According to most manufacturers, however, fuel consumption of these new machines should decrease by as much as 5 percent and maintenance costs should decline by roughly 1 percent, though only limited data on either metric has been available. Anticipated longer-term benefits, such as increased employee productivity, enhanced engine reliability and reductions in absenteeism and employee health costs will
be more difficult to assess.

For rental operators, if there are reductions in maintenance, repair and replacement costs, it could help mitigate a portion of the purchase price increase over time.

The regulations generally do not require equipment rental companies to dispose of their current fleets of machines with diesel engines using older technology, although California has adopted its own standards. Local work sites in a growing number of areas have, however, begun to require Tier 4 technology with respect to at least a portion of the equipment used on the site, meaning rental operators likely will have little choice but to move quickly toward replacement or retrofitting, where possible, fleets in those areas.

Equipment rental companies have begun to ask two very relevant questions: “How do the new regulations affect me?” and “What should I be doing to prepare for them?”

Here are some suggested recommendations:

  • Familiarize yourself with the technologies and which manufacturers are using them. The following is a list and description of several of the Tier 4 technologies most commonly in use today:

Electronic control module unit. This is a device that monitors, controls and provides users with real-time information on the engine, transmission and other vehicle functions, including installed Tier 4 equipment.

High pressure fuel rail injection. This system uses a high-pressure fuel rail (pipe) to feed individual solenoid valves/injectors with as many as five fuel injections per stroke — rather than using a fuel pump to feed injectors — at pressures approaching 30,000 psi.

Variable valve actuation. Late intake valve closing, which reduces the effective compression ratio, thereby lowering compression temperatures, which yields reduced NOx emissions.

Diesel oxidation catalyst. This honeycomb-shaped device coated in a catalyst is designed to trigger a chemical reaction, which breaks down pollutants, such as particulate matter, hydrocarbons and carbon monoxide in the exhaust stream, turning them into less harmful components.

Variable geometry turbocharger. A turbocharger — a turbine which forces air into the engine’s combustion chamber, increasing power and efficiency — with a variable aspect ratio to accommodate both low and high speeds largely overcomes the capacity constraints of conventional turbochargers.

Diesel particulate filter. This device often is installed adjacent to or near the diesel oxidation catalyst, which uses exhaust heat to oxidize or burn trapped particulate matter, yielding nitrogen and carbon dioxide. These filters may require “active” regeneration when the heat generated by operation of the engine is not sufficient to oxidize all of the trapped particulate matter automatically. If active regeneration is overridden or delayed, the filter can clog, resulting in engine derating, which is loss of power, and eventually shutdown. For rental stores, overriding should be avoided or prohibited on the machine if possible.

Selective catalytic reduction. In this system, diesel exhaust fluid (DEF) is injected into the exhaust stream at or near its end, breaking down NOx into harmless nitrogen gas and water vapor.

Ammonia oxidation reduction catalyst. This device uses a metallic catalyst to oxidize excess unburned ammonia, which can clip through the selective catalytic reduction module.

Positive or closed crankcase ventilation. This recirculation system is used for “blow-by” exhaust gases that normally escape from the crankcase into the atmosphere. The system typically redirects exhaust gases after filtering closed systems back into the engine’s air intake system to be re-burned in the combustion process.

Exhaust gas recirculation. This recirculation system routes some exhaust gases back into the engine’s air intake system, thereby reducing NOx emissions. Exhaust gases cannot be 100 percent recirculated because excess exhaust gas recirculation volume causes incomplete combustion, raising particulate matter levels.

Assess maintenance and training requirements. The majority of the new technologies installed on Tier 4 engines will require some maintenance. Selective catalytic reduction systems, for example, may require relatively frequent DEF refills. Particulate matter filters will require periodic ash removal and/or replacement and closed crankcase ventilation filters will require replacement at predetermined intervals, though often through manufacturer and/or dealer-sponsored exchange programs. The systems also can be substantially different from manufacturer to manufacturer, making it important to understand not only how complex and expensive any required maintenance is likely to be, but also how much employee training and follow-on support will be made available by the manufacturer and/or dealer.

  • Plan for parts and consumables requirements. Until operators gain sufficient experience, manufacturers, dealers and OEM manuals are likely to be the best sources of information regarding parts/spares, maintenance and repair planning. In addition, maintaining an adequate supply of diesel exhaust fluid will be important for those who purchase equipment utilizing selective catalytic reduction systems. Also be aware that some aftermarket parts, such as filters, may not meet the applicable Tier 4 performance criteria.
  • Plan for customer training issues. Even extremely careful equipment rental companies are likely to have to rely on their customers for the performance of some types of Tier 4 maintenance, for example, refilling diesel exhaust fluid and allowing machines to oxidize particulate matter through regeneration that might otherwise clog particulate matter filters. Customers often will be less familiar with such requirement than rental operators, at least in the early stages of Tier 4 implementation. This will make educating your customers critical to maintaining the health of your equipment. It is important to note the following:

Using regular diesel fuel that is not ultra-low-sulfur diesel (ULSD), can severely damage Tier 4 emission control systems over time. Be careful to advise your customers to only use ULSD in all Tier 4 engines. This is particularly important outside of the U.S. and Europe, where ULSD is not as readily available.

Keep the cooling system full and do not delay repairing leaks. If the coolant level drops, it can create a hot spot in the engine gas recirculation system’s cooler and damage it.

Check to make sure the pressure cap is sealed. Proper system pressure raises the boiling point of the coolant, making it more difficult to overheat the system.

Be diligent in maintenance. Failure modes that send fluids or hard parts downstream can damage the exhaust aftertreatment system and necessitate expensive repairs.

  • Plan for mishaps and legal issues. As many equipment rental companies know, a lack of customer knowledge can spell disaster, particularly for the rental store’s expensive new equipment. After the damage has been done is not the time to try to determine who is responsible for an expensive repair. It is imperative that the customer be required in writing to review and comply with all Tier 4 monitoring and maintenance protocols, especially on longer-term rentals, and that the owner/rental company be entitled to inspect and maintain the equipment as and when the owner/rental company deems necessary and recover damages for customers’ non-compliance.

James Waite, Esq., is the former general counsel at RentX Industries and is the author of the American Rental Association’s (ARA) “Business Management: Contracts and Legal Guidelines.” A military veteran, Waite holds a Juris Doctor from St. Mary’s University in San Antonio and an MBA from Northwestern University in Chicago. He writes rental contracts, use and safety instructions, Tier 4 addenda and other documents for rental operations worldwide. He can be reached at 866-582-2586 or j.waite@wwlegal.net.


Tier 4 facts

  • The Environmental Protection Agency (EPA) can assess fines of up to $37,500 per violation against original equipment manufacturers and dealers, and up to $3,750 per violation against individuals for such actions as tampering with Tier 4 emission devices.
  • Diesel exhaust fuel (DEF) has a shelf-life of 12 months if stored at below 86 degrees Fahrenheit, but if stored at higher temperatures, its shelf-life is reduced to six months.
  • DEF corrodes ordinary carbon steel and aluminum, so you must use stainless-steel or composite plastic tanks to store it.
  • DEF freezes at 12 degrees Fahrenheit.
  • You are required to use low-ash oil in all Tier 4 engines. This helps reduce congestion in particulate matter filters.
  • The use of ultra-low sulfur diesel (ULSD) — 15 ppm or less of sulfur content — is required in all Tier 4 engines.
  • Use of non-ULSD in a Tier 4 engine can result in severe and permanent damage to emission control systems.
  • Use of non-ULSD may void an engine’s warranty.
  • Use of biodiesel — at 15 ppm or less of sulfur content — is specifically authorized by some manufacturers. Be sure to check with the equipment manufacturer.
  • It is illegal to add oil to your fuel.

— James Waite


Tier 4 legal issues

As is virtually always the case with new technologies, equipment rental companies should expect a number of new legal issues to arise over the next several years. For example, there likely will be damage resulting from maintenance failures, warranty claims, fines and penalties, updated guidelines, work-site restrictions and more. Who will be responsible and pay for them?

Rental contracts in use today do not cover any of these issues. The technology simply is too new, meaning the potential cost and liability issues have yet to be fully assessed. If you do not have time to revise your current rental contract, consider using a Tier 4 contract addendum to:

  • Advise your customers of application EPA/EU requirements.
  • Obtain their agreement to comply with them.
  • Indemnify you for noncompliance.

Doing this may be the difference between recovering a large emission controls-related loss or suffering a hefty and unreimbursible expense. Examples of Tier 4 contract addenda are available online at equipmentrentalcontracts.com.

— James Waite




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