Truck, Engine Makers Challenge EPA Fines For Navistar

Date : 02/23/2012 @ 4:39PM
Source : Dow Jones News
Stock : Cummins Inc. (CMI)
Quote : 177.1  1.79 (1.02%) @ 4:02PM

Truck, Engine Makers Challenge EPA Fines For Navistar

Navistar (NYSE:NAV)
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Navistar International Corp.'s (NAV) competitors are challenging fines imposed by U.S. regulators that would allow Navistar to sell diesel truck engines that fail to meet the latest pollution standards for engine exhaust.

Cummins Inc. (CMI); Volvo Group North America, the maker of Mack trucks and a unit of Sweden's Volvo AB (VOLV-B.SK); and Daimler AG's (DAI.XE) Freightliner truck and Detroit Diesel engine units, are accusing the U.S. Environmental Protection Agency of disregarding its own rules when it created a set fines in late January for Navistar engines that don't meet the agency's 2010 standard for nitrogen oxide in engine exhaust.

"We were compliant on day one," said John Mies, a spokesman for Volvo Group North America. "We think this is outrageously unfair and another blatant accommodation by the EPA to a company that adopted a failed emissions strategy."

The companies have asked the U.S. Court of Appeals in Washington, D.C., to overturn the EPA's fines for noncompliant engines. Neither Navistar nor the EPA would comment on the complaints.

Illinois-based Navistar has been relying on pollution credits for the past two years to comply with the EPA's regulation of 0.20 gram of nitrogen oxide per brake-horsepower hour. Navistar's heavy-duty engines are believed to be at about 0.50 gram. The EPA has acknowledged that it suspended its regular rule-making procedures to enact the fines because Navistar is on the verge of running out credits for heavy-duty engines. That would effectively force the company to stop building engines and selling heavy-duty trucks.

Navistar has struggled more than other truck makers to meet the 0.20 gram standard, although the company insists that its engines will soon comply. Navistar reduces nitrogen oxide through exhaust-gas recirculation, or EGR, which recirculates exhaust through an engine's combustion process, burning the nitrogen oxide that otherwise would be sent into the atmosphere from a truck's exhaust pipe.

Critics of EGR say the process makes engines less fuel efficient than selective catalytic reduction, or SCR, which is used by other engine makers in North America and Europe. SCR filters engine exhaust through a urea solution that turns nitrogen oxide into water and nitrogen. Nitrogen oxide is an ingredient in the atmospheric greenhouse gas that's blamed for global warming.

The EPA's maximum fine on a noncompliant heavy-duty engine is just below $2,000. Navistar's competitors maintain the fines are too low, thereby rewarding Navistar for not making the same investment in pollution reduction as companies whose engines already comply with the standard.

"It's really important that the EPA sets fines high enough to not provide an incentive for noncompliance," said Janet Williams, an spokeswoman for Indiana-based Cummins.

Navistar is expected to petition the court to intervene in the case, which puts the company and the EPA in the awkward position of being on the same side of the dispute over the fines. Navistar has waged a prolonged legal battle against the agency's approval process for selective catalytic reduction. The company alleged the EPA submitted to pressure from truck and engine makers to authorize the use of SCR and disregarded evidence that trucks could operate without a functioning SCR system.

The company sued the EPA last year to force a recall of engines with SCR and to compel the EPA to surrender documents that Navistar claimed would demonstrate flaws and mistakes in the agency's evaluation of SCR. But a U.S. district court judge dismissed the case in January, saying she would not "allow Navistar to go a fishing expedition in the EPA's records simply because Navistar is dissatisfied."

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

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