Opinion: EPA’s New Engine Standard -- An Economic and Environmental Defeat Device

Click here to write a Letter to the Editor. By Donald J. Schneider President Schneider National Inc. While the impressive growth in gross domestic product in the first quarter would seem to indicate an economic recovery might be in the making, the Environmental Protection Agency’s new engine standards, set to go into effect on Oct. 1 of this year, represent a significant economic setback to original equipment manufacturers, the motor carrier industry and the shipping public just as the economy is beginning to turn around. As a major end-user of diesel engines, we strongly support cleaner diesel engines. However, we believe implementing EPA’s new standards this year is ill-advised and will have a negative impact on manufacturing jobs, the economy and the environment. But most importantly, like most other fleets, we simply will not risk our customers’ delivery and manufacturing schedules by purchasing unproven engines. Road testing a new engine design is very different than lab testing, and without reliable data on roadworthiness, we cannot risk broken-down equipment and widespread engine failures. Over the past 10 to 15 years, truck engine makers have succeeded in simultaneously improving engine performance while reducing overall emissions. However, the technological challenge of meeting the new standards has proven more difficult than many imagined. In 1998, EPA estimated the cost of compliance with the new standard would be less than $320 million, and while the new technology might slow improvement in fuel performance, no degradation in fuel efficiency was expected. Estimates for price increases for the new engines were projected in the range of $1,000 to $1,500 per engine. It is now clear, based on EPA’s own analysis, that it drastically underestimated the costs associated with implementing the new engine standards, and it has done a complete about-face in characterizing the economic costs of implementing the new standards. EPA is now estimating an average increase in fuel consumption of 2.5%. We believe the actual fuel degradation will be closer to 4%, and will likely increase operating costs by 2 cents per mile. What’s more, the cost to own and operate new engines may be double that of existing engines due to increased purchase prices, increased maintenance intervals, more down-time and reduced residual value, as well as increased fuel consumption. Instead of a compliance cost of $320 million, EPA now estimates the cost of compliance approaches $2 billion! Setting aside the cost issues for a moment, the whole point of the new emissions standard is to support the introduction and adoption of cleaner diesel engines. However, EPA’s actions to implement the new standards this year will have the opposite effect on the environment. With few engines having been certified as complying with the new standards, most fleets need between 18 and 24 months to properly validate an engine’s performance, reliability and cost-effectiveness. The lack of engine availability combined with serious price uncertainty has caused the market to become spooked as evidenced by the massive "pre-buy" of truck engines underway. In March, new truck orders were up 170% over the previous year, and first quarter orders were in excess of 70,000 units as compared with 38,000 the previous year. The pre-buying frenzy is about to come to a close as truck makers run out of capacity to deliver units before the deadline. After October, there will be an extended "no-buy" period as trucking companies simply extend the life of their existing equipment and supplement their fleets with used equipment until the new engines can be properly field tested and their performance validated. The environmental benefits associated with the widespread adoption of the new engines will be delayed and the engine and truck makers will likely endure a post-October bust resulting in lost jobs and idled production lines. So what can be done? Rather than hold on to an October 2002 deadline, we think the EPA should delay the introduction of the new standards for a full year so the new engines can be fully road-tested and their performance and reliability validated. A delay coupled with a "pay-back" of the "emissions debt" created by the extension will continue to move the engine makers toward production of cleaner engines while preserving the environmental benefits we all seek. This phased approach will preserve the environmental benefits of the new emissions standards while avoiding the boom and bust cycles for engine makers and truck manufacturers, and it will lessen the serious economic impact on the trucking industry and the shipper community as a whole. What can you do? We encourage you to get involved by letting the EPA and your elected officials know how your concerns about the new engines’ cost, reliability and durability will affect your purchasing and planning decisions. While we didn’t create this problem, together we can be a voice in its fair resolution. Schneider National Inc., Green Bay, Wis., provides truckload, intermodal and logistics services in North America. The company ranks No. 6 in terms of revenue on the Transport Topics 100 for 2000-01 and is considered the largest of the truckload carriers. This story appeared in the May 20 print edition of Transport Topics. Subscribe today.