Engine makers settle on EPA pollution claims

WASHINGTON, D.C. — For years, diesel engine-makers in North America have jumped through hoops to meet ever-tougher emissions rules. According to the U.S. Environmental Protection Agency (EPA) and the Dept. of Justice, they’ve been more adept at leaping through loopholes.

Last month, six engine manufacturers agreed to spend more than $1 billion US in order to settle allegations by the two agencies that engines in as many as 1.3 million trucks built over the last 10 years are designed to defeat pollution controls in violation of the Clean Air Act.

The settlement stems from allegations that Caterpillar, Cummins Engine, Navistar International, Detroit Diesel, Volvo, and Mack Trucks violated the Clean Air Act by selling heavy duty diesel engines equipped with “defeat devices” — software that alters an engine’s pollution control equipment under highway driving conditions. The companies account for 95% of the diesel engines on North American roads.

The government believes that the engine manufacturers use their electronic engine controls to ensure that engines pass federal emissions tests, which are conducted in a laboratory. But under highway conditions, the engine controls alter the fuel-injection timing when the vehicle is being driven at highway speeds. This delivers better fuel economy, the EPA said, but allows up to three times the limit of nitrous oxide (NOx), which contributes to the formation of ozone and carries a variety of health risks.

The Clean Air Act prohibits any manufacturer from selling any new motor vehicle engine equipped with any device designed to defeat the engine’s emission control system. Although the engine manufacturers have used electronic engine controls for the better part of the decade, the EPA said it only discovered the problem in 1997. Following an investigation, negotiations for a settlement discussion began earlier this year.

“These defeat devices are really deceit devices,” EPA administrator Carol Browner said. “They defeat important public health protections and deceive the American people.” The engine manufacturers have admitted no wrongdoing, and each says it made the settlement to avoid a lengthy legal battle.

“Our engines have never employed any type of device to evade EPA guidelines,” Caterpillar vice president Sid Banwart said. “Our engines have always been in compliance with the Clean Air Act and EPA emissions regulations.”

In a letter to customers, Cummins chairman and CEO Jim Henderson said, “While we believe that we are in full compliance and a court would find that Cummins has done nothing wrong, we looked at the possible impact of protracted and expensive litigation on our shareholders, employees, and customers and determined that the best course of action was for us to settle the matter and put it behind us.”

Looks like a good move. The settlement requires that the companies collectively pay $83.4 million in civil penalties (one fourth will be paid to the California Air Resources Board, with which the companies have made a related settlement), which political haymakers are quick to point out is the largest in environmental enforcement history.

Individually, Caterpillar will pay $13 million; Cummins, $25 million; Mack and its parent, Renault V.I., $13 million; and Volvo, $9 million-nothing to sneeze at, but amounts that are of little financial consequence to billion-dollar corporations. (Fine amounts for Detroit Diesel and Navistar were not available.)

Combined, the companies will also pay $109.5 million to fund environmental research projects to lower NOx emissions, including developing low-emitting engines that use new technologies and cleaner fuels-work that would keep busy engine R&D departments humming with or without the agreement.

The six manufacturers are also required to invest an estimated $850 million combined to develop pollution controls for new engines and retrofit older engines. Engines will not be recalled, as several environmental groups had lobbied for, but instead will be outfitted with new pollution limiters when they are routinely rebuilt or overhauled.

The companies will have to sharply reduce emissions from new engines by the end of the year, and to meet stricter EPA targets that were set to take effect in January 2004 by October 2002. The companies also will ensure that when older heavy duty diesel engines are rebuilt, their excess emissions will be reduced. Two manufacturers, Mack and Cummins, said that given current diesel engine technology, the new emissions standards are not expected to have any significant impact on fuel consumption, performance, or product development work. Another, Caterpillar, announced that it will make retrofit kits available for engines produced between 1993 and 1998.

All told, the deal is expected to reduce nitrogen oxide air pollution from diesel engines by one-third in five years, according to the EPA. Indeed, over the past 20 years, engine manufacturers have reduced regulated NOx emissions by nearly 70% and lowered particulate emissions by 90%. During that same period, diesel fuel efficiency improved 25%. In 1996, the industry and the EPA cooperatively reached a voluntary agreement to reduce urban NOx emissions another 50% by 2004.

The manufacturers will be subject to additional heavy penalties if they fail to meet the agreement deadlines, the EPA said, and will be required to pass new emissions tests to ensure there are no new defeat devices used.

The agreement with the diesel engine manufacturers is the third major Clean Air Act settlement with vehicle manufacturers in the past three years. In June, the Justice Dept. and EPA settled charges against American Honda Motor Co. for $267 million and Ford Motor Company for $7.8 million for selling vehicles with a device that defeats emissions control systems. In 1995, the two agencies reached a $45 million settlement with General Motors for installing defeat devices in 500,000 Cadillacs, increasing carbon monoxide emissions when the climate control system was on.