Daimler, Volvo Ask Court to Toss EPA Engine Ruling

This story appears in the Oct. 28 print edition of Transport Topics.

WASHINGTON — Attorneys for Daimler Trucks North America and Volvo Group last week asked a federal appeals court to throw out an Environmental Protection Agency rule that allowed Navistar Inc. to pay penalties to market engines that failed to meet 2010 federal emissions standards.

Arguing before a three-judge panel of the U.S. District Court of Appeals for the District of Columbia Circuit, plaintiffs’ attorney Christopher Handman said EPA should not have allowed the so-called “nonconformance penalties” because Navistar instead could have employed an emissions-compliant selective catalytic reduction technology.

Navistar failed to comply with the standard for nitrogen oxide (NOx) compounds not because the OEM was a “technological laggard,” but for economic reasons, choosing to use exhaust gas recirculation technology rather than the available SCR technology that had been adopted by all other truck manufacturers, Handman said.

He told Transport Topics after the Oct. 22 hearing that the truck makers’ motive in bringing the court action was to vacate a rule based on flawed reasoning to justify use of the penalties, not to disallow blanket use of penalties in the future.

Navistar initially focused on generating emission “credits” that could be used to compensate for nonconforming engines in the early years of the tightened federal regulations.

EPA’s regulations allow manufacturers to accrue credits when an engine’s emissions are below the applicable limit and “bank” them to spend in later years on engines with emissions that are above the applicable limit.

However, Navistar ran out of credits near the end of 2011 — nearly two years after the standard went into effect.

As a result, EPA published a Nonconformance Penalty In­terim Final Rule in January 2012, requiring that Navistar pay no more than $1,919 per out-of-compliance engine it sold.

Although EPA in the past permitted manufacturers to pay penalties for failing to meet emissions standards, it was the first time it approved penalties after the new standard went into effect, Handman told the court.

“To authorize two-and-a -half times the legal limit of NOx on engines that will now be on the road for 20 years is a pretty bold statement when all you have to do is adopt a technology that is actually out there,” Handman said.

But EPA attorney Michele Walter said the penalty option was justified because changing to SCR would have required “substantial work” on Navistar’s part to meet the standard in a timely manner.

“This isn’t like just switching out a muffler,” she said. “It’s a very complicated process.”

Walter said that Navistar told EPA it is currently paying the penalties on only a few 2013 13-liter engines.

“All of their other engines, including the 15-liters, have been switched over to compliant technology,” she said. “By the end of this year, Navistar will not be using nonconformance penalty certificates anymore. By the beginning of 2014, all of their engines — including the remaining 13-liter models currently using certificates — will be compliant” with federal standards.

She said even if the rule was vacated by the appeals court, it would cause no harm to Navistar, and the truck makers are asking the agency to “unring a bell.”

Walter said that Congress allowed the penalties as a way to protect manufacturers that lagged behind in their technology, but at the same time it didn’t want to put those who were successful at a competitive disadvantage.

The four parties opposing EPA and Navistar are DTNA and its Detroit Diesel Corp. engine subsidiary, Mack Trucks and Volvo Trucks.

In a related action, on Oct. 18 another three-judge District of Columbia appeals panel rejected a petition for review by the truck makers challenging the conformance certificates issued to Navistar. The court said the certificates had expired at the end of 2012.

“Accordingly, we conclude Daimler’s challenge to the certificates is moot, and we dismiss the petitions for review thereof,” the decision said.