Navistar Faces Fines From EPA if Engines Do Not Meet Rule

This story appears in the Jan. 30 print edition of Transport Topics.

The Environmental Protection Agency said it would impose a penalty of about $1,900 per engine against Navistar Inc., beginning as soon as late February, if it produces heavy-duty truck engines that don’t comply with the agency’s 2010 emissions regulations.

Agency officials said last week the reason for the penalty, implemented in an unprecedented emergency rule, is that the federal credits Navistar has used to comply with the 2010 emissions standards are projected to run out by the end of February.

Navistar earned the credits, through a program that EPA has had in place for many years, by producing medium-duty engines after 2007 that had exhaust emissions below levels EPA mandated for those years.

The agency said the penalty would “level the playing field without interfering in the actual marketing or pricing of the engines.”

Although Navistar said it plans to introduce an EPA 2010-compliant engine in the next few weeks, the company has yet to submit an application to certify any of its new heavy-duty diesel engines without using the credits, said Margo Oge, director of EPA’s Office of Transportation and Air Quality.

“If we did not have this penalty structure, they could not introduce these engines in the marketplace after they run out of credits,” Oge told Transport Topics in a Jan. 23 interview.

The financial penalties would be graduated to increase from $1,900 per engine the longer Navistar stayed out of compliance, Oge said.

Although EPA has issued nonconformance penalties seven times since 1995, Oge said its actions against Navistar, mark the first time the agency has issued a nonconformance penalty interim final rule on an emergency basis. The interim rule will cover model years 2012 and 2013.

“Because Navistar told us late last fall that they are running out of credits, the agency had to take an emergency step,” Oge said. “If we didn’t do that, basically come February, Navistar would be shutting down.”

Navistar is the only heavy-duty diesel engine maker to use exhaust gas recirculation alone to reduce nitrogen oxides emissions. All of Navistar’s heavy-duty truck engine competitors use selective catalytic reduction to reduce NOx.

[Earlier this month, a federal judge dismissed Navistar’s suit over other manufacturers’ use of SCR technology.]

Jim Spangler, Navistar’s chief communications officer, said Navistar will discuss its plans to introduce an emissions complaint heavy-duty 13-liter engine model at a Feb. 1 analysts meeting.

“We’re going to be submitting a 0.2 [gram of NOx per brake horsepower-hour] big-bore en-gine for production certification in the next few weeks,” Spangler said. “Once certified, we’ll be the only OEM in the world that has achieved a 0.2 solution without SCR.”

“The certification process takes time, so if needed, we will utilize the EPA penalty rule to continue producing engines,” Spangler added.

He said that any projections of the date Navistar’s credits will run out is “pure speculation.”

“We have not commented publicly on our credits,” Spangler said. “We don’t do so because it’s proprietary.”

Oge said Navistar’s competitors “are telling us that the penalties are low,” although most did not provide comments to TT.

One engine maker that did comment was Volvo Group Americas. The $1,900 penalty “isn’t a penalty; it’s a reward,” said Denny Slagle, head of North American operations for Volvo Group.

“As a company that spent more than $425 million to ensure that we were compliant on Day One, we think this is outrageously unfair and another blatant accommodation by the EPA to a company that adopted a failed emissions strategy,” Slagle said in a Jan. 26 statement.

Robin Easton, treasurer of Paccar Inc., which owns both Peterbilt Motors and Kenworth Trucks, declined comment. A spokesman for Daimler Trucks North America did not respond to a request for comment.

A Cummins Inc. spokeswoman said the engine maker was in the process of reviewing the proposed EPA penalty plan.

“We support tough, fair and enforceable standards and will work to ensure that this goal is achieved,” the spokeswoman said.

EPA’s rules allow manufacturers to accumulate credits during years when their engines surpass existing emissions standards and apply them to years when their engines don’t meet the required levels.

Navistar’s heavy-duty engines so far have been unable to meet the federally mandated NOx limit of 0.2 gram per brake horsepower-hour without using credits. Navistar’s engines currently produce 0.5 gram per brake horsepower-hour.

If engines exceed the 0.5-gram limits after the credits expire, the federal penalty would not apply and production would have to stop, EPA said.

In addition to its emergency interim final rule, EPA issued a proposed rule for a longer-term plan to penalize Navistar or other engine producers that are not in compliance. The agency is seeking public comment until April 4 on the proposed rule, which it expects to become final in September and to take effect on Nov. 13.

In addition to the EPA penalties, Navistar could be facing an even greater challenge with the California Air Resources Board, which presently doesn’t have the power to allow sales of noncompliant engines.

On Jan. 13, CARB issued an executive order that would prohibit Navistar from “introducing into commerce” any new “heavy, heavy-duty” engine models — those produced for vehicles weighing more than 33,000 pounds — in the state after its federal emissions credits run out on Feb. 29.

Jackie Lourenco, chief of CARB’s new vehicle and engine programs branch, told TT that the Feb. 29 end date could change slightly because it is based largely on Navistar’s previous and future model years’ U.S. sales.

“The executive order is based on the information that we had available to us at the time of certification,” Lourenco said. “If their credit numbers change, if they have more credits, then we would go ahead and reissue an executive order that reflects the updated calculations.”

But Navistar’s challenges in California are exacerbated by the fact that CARB currently does not have the legal authority to penalize engine manufacturers for producing emissions noncompliant engines.

Therefore, the state’s only options would be to seek new state legislation enabling penalties or not to allow the nonconforming engines to be introduced in California, Lourenco said.