EPA Raises Navistar Fines

This story appears in the Sept. 10 print edition of Transport Topics.

Truck and engine maker Navistar Inc. can continue selling its noncompliant MaxxForce engines using exhaust gas recirculation, but the penalties will be nearly double what was originally proposed, according to an Environmental Protection Agency final rule that went into effect Sept. 5.

The maximum per-engine fine jumped to $3,775 from $1,919 under the interim rule. The regulation won early endorsements from Navistar and independent engine maker Cummins Inc., which had been a party to legal action against the earlier rule.

While the fines are higher than first proposed, the ruling removes a major obstacle for Navistar by allowing it to continue selling its old engines until it can get new compliant

models from Cummins and its own factory into the company’s trucks.

“We can now provide our dealers and customers with clarity and certainty as we transition to our clean engine technology and look forward to utilizing the final rule as needed,” Troy Clarke, the new chief operating officer of Navistar International Corp., said in a statement.

Clarke said the final rule does not affect any International truck sold earlier this year with a nonconforming engine.

Also last week, Navistar reported its latest earnings and provided an update on the plans from its new management team (see story, p. 5).

Cummins now appears to have switched sides on the engine issue. It joined Daimler Trucks North America and Volvo Group in opposition to the interim rule that was struck down in June by a federal appellate court.

“Cummins believes that EPA produced a balanced final rule,” said Carol Lavengood, a spokeswoman for the company’s engine business.

She said Cummins managers are still reviewing the document, “but I expect we won’t appeal. We said we need a level playing field, and I think this rule achieves it.”

Volvo Group, which operates in North America as Volvo Trucks, Mack Trucks and Volvo Powertrain, opposed the final rule.

“All we ever wanted from EPA was a level playing field, and this decision, unfortunately, doesn’t provide that. Therefore, we have to keep our legal options open,” said spokesman John Mies.

Daimler Trucks North America declined to comment on the rule.

Any party wishing to challenge the rule in a federal appeals court has until early November to do so.

The noncompliance penalties are the result of EPA’s January 2010 regulatory standard on nitrogen oxides emissions for on-highway diesel truck engines. The agency has lowered the ceiling on the emission of NOx compounds three times since October 2002.

As of 2010, it was set at 0.2 gram per brake horsepower-hour. Prior to the 2002 changes the limit was 4 grams per unit of work performed.

Navistar’s main heavy-duty North American competitors all used selective catalytic reduction technology in conjunction with some EGR. Navistar tried to hit the standard with EGR only.

When it became apparent the EGR strategy would not work — in part because its banked federal emissions credits were being used up — Navistar said it would switch to an SCR approach, including the use of diesel exhaust fluid, or liquid urea (8-27, p. 1).

The engine program failure led to the departure of Navistar’s longtime president, chairman and CEO, Daniel Ustian, who recently retired (9-3, p. 1).

EPA issued the final rule after a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled unanimously in June that EPA must construct a new rule under more rigorous procedures.

The new final rule was signed by EPA Administrator Lisa Jackson late on Aug. 30 and published in the Federal Register on Sept. 5.

EPA’s new rule issues penalties for excess NOx emissions on a sliding scale. If the 0.2-gram standard is met exactly or bettered, there are no fines. If NOx output hits 0.5 gram per unit of work performed, the maximum fine is $3,775 per engine. Between 0.2 and 0.5 gram, the fine rises in a straight line.

NOx output exceeding 0.5 gram cannot be certified at all.

This schedule of fines remains in place for 2012 model year engines, or roughly through the end of this year. For 2013 model engines, the per-engine fines will escalate by several hundred dollars as an incentive for Navistar to find a permanent solution, EPA said.

Moving forward, Cummins is a linchpin of Navistar’s engine transition strategy. Early next year, Navistar said it will begin offering its customers the option to specify ISX 15-liter engines built by Cummins or Navistar’s 11- or 13-liter MaxxForce engines with SCR aftertreatment systems built by Cummins added to them.

Lavengood said Cummins and Navistar executives are still negotiating the memorandum of understanding announced in August.