Court blocks EPA plan for Navistar engine exemption
The court found EPA interpreted the “good cause” exception too broadly, agreeing with the petitioners the only purpose of the IFR was “to rescue a lone manufacturer from the folly of its own choices.”
By Kevin Jones
The Trucker Staff
6/13/2012
WASHINGTON — Saying a “day of reckoning is fast approaching” for Navistar International Inc., a federal court has rejected a penalty system recently set by the Environmental Protection Agency allowing Navistar to sell engines that don’t meet clean air standards.
In siding with the Navistar competitors who petitioned for the review, the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday said EPA failed to follow government procedures in January when the agency promulgated an interim final rule (IFR) to permit manufacturers of heavy-duty diesel engines to pay nonconformance penalties (NCPs) in exchange for the right to sell noncompliant engines.
EPA acted without providing formal notice or an opportunity for comment, invoking the “good cause” exception provided in the Administrative Procedure Act (APA), but the court found that none of the statutory criteria for “good cause” were satisfied, and vacated the IFR.
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The decision is the latest round in the kerfuffle over the best technological solution for meeting stringent EPA emissions standards that took effect in 2010.
Navistar stood alone in opting to stick with an exhaust gas recirculation (EGR) solution, marketing its “customer-friendly” advantages. Selective catalytic reduction (SCR), adopted by all other North American heavy-duty truck and engine makers, relies on a urea-based exhaust aftertreatment system, which requires an on-board storage tank for the liquid and regular refills by the operator.
The SCR engines have been compliant for more than two years. Navistar, however, is still awaiting word from EPA on certification of its MaxxForce engine family under the 2010 NOx standard, and to keep selling them the company has relied on credits earned for attaining previous standards ahead of schedule.
“Simply put, [Navistar] bet on finding a way to make exhaust gas recirculation a feasible and compliant technology before its finite supply of credits ran out,” said the court ruling, filed by Circuit Judge Janice Rogers Brown.
The company informed EPA last October that those credits would run out sometime this year.
Determining Navistar to be a “technological laggard” and eligible for regulatory relief, EPA allowed manufacturers to sell heavy-duty diesel engines in model years 2012 and 2013 as long as they pay a penalty of $1,919 per engine, with an upper limit set at 0.50 grams of nitrogen oxide per horsepower-hour — thus permitting emissions of up to two-and-a-half times the 0.20 grams permitted under the 2010 NOx standard with which Navistar’s competitors already comply, the court noted.
And so those competitors protested, objecting to both the methods used by EPA to justify the rule and the substance of its plan, arguing the agency “grossly underestimates the true cost of compliance” — and that the low penalty could even tempt other manufacturers to opt for the penalty and sell non-compliant engines of their own.
Indeed, the court found EPA interpreted the “good cause” exception too broadly, agreeing with the petitioners' language that the only purpose of the IFR was “to rescue a lone manufacturer from the folly of its own choices.”
“The IFR does not stave off any imminent threat to the environment or safety or national security,” said the ruling. “It does not remedy any real emergency at all, save the ‘emergency’ facing Navistar’s bottom line.”
Noting that a ruling based on procedural grounds “will be of limited practical impact” because a final rule on the matter is pending, the court offered additional observations “before the ink is dry” on that final rule: First, the NCPs are meant to be a temporary bridge for manufacturers that have “made every effort to comply”; and, second, the Clean Air Act expressly demands that EPA “remove any competitive disadvantage” to compliant engine makers — which the penalty and upper NOx limit set in the NCP likely fail to do.
Those competitors applauded the court’s decision.
“Our interest has always been ensuring a level playing field, so we’re pleased with this decision,” said John Mies, spokesman for Volvo Group, whose Mack Trucks and Volvo Group North America units were parties in the suit.
Daimler Trucks North America also participated.
“It is important to note, all but one manufacturer in our industry uses SCR technology, a technology that provides significant improvements in both air quality and fuel economy,” spokesman Dave Giroux said. “DTNA continues to work closely with the EPA to develop technologies that improve air quality and fuel economy. DTNA is committed to continuing to work with the EPA to address critical issues facing the United States such as greenhouse gas reduction and reduction of dependence on foreign oil. Our technologies are fully compliant now — and into the future — without need for credits or penalties.”
Navistar, in a statement, noted that while the lawsuit was filed against the EPA, the company “is impacted by the decision.”
“We disagree with the court’s ruling and will ask for a rehearing,” the statement said. “Navistar will work with EPA to fully understand the ruling and its impact on the use of NCPs until a final rule is implemented. At the same time, we will continue to cooperate with the EPA on the final NCP rule and will continue to work with the EPA on our 0.20g NOx certification.
“Navistar continues to make and ship engines and our customers will continue to receive the products they ordered with EPA certified engines.”
A Navistar spokesman said the company was not prepared to discuss the impact of the decision beyond its statement. EPA referred any questions to the Justice Department, which declined to comment.
The final rule and submitted public comment, including Navistar’s arguments in favor of NCPs and other truck and engine makers’ opposition, can be found at www.regulations.gov, docket ID EPA-HQ-OAR-2011-1000.
For additional background and discussion, see the July 1 edition of The Trucker.
Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.
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