EPA in Regulatory Pretzel With a Business Partner
Navistar Licensing EPA Diesel Emissions Technology That Does Not Work
Washington, DC — The U.S. Environmental Protection Agency has tried to give an enforcement break to a company with which the agency is in a business partnership, according to documents posted by Public Employees for Environmental Responsibility (PEER). EPA licensed clean diesel truck technology to Navistar but the technology fails to meet EPA’s own emission standards. Rather than banning noncompliant engines from the road, EPA allowed Navistar to pay a fine, even as the agency received royalties from the company.
Since the mid-90s, the federal government has spent more than $2 billion developing motor vehicle and engine technologies to improve fuel economy and reduce emissions. A large portion of this funding flowed through EPA’s National Vehicle & Fuel Emissions Laboratory. In 2004, the lab unveiled clean diesel combustion technology designed to meet the EPA light-duty vehicle Tier 2 and the heavy-duty on road emission standards for nitrogen oxides (NOx) associated with smog and acid rain. EPA named this technology Clean Diesel Combustion (CDC), for which it obtained a patent.
That same year, EPA entered into a licensing royalty agreement for CDC with Navistar (formerly International Truck and Engine Corporation), which remains in effect today. Unfortunately for Navistar, its CDC-equipped engines have been unable to meet the NOx standards. Instead of banning the sale of noncompliant diesel trucks, EPA let Navistar pay a fine of approximately $2,000 per truck.
Even as it pays the fines, Navistar is also paying EPA royalties in amounts the agency refuses to divulge in response to a PEER Freedom of Information Act request. Some of this royalty money also goes directly to EPA engineers who developed the CDC patent, under terms of the Federal Technology Transfer Act.
“EPA is entangled in a blatant conflict in regulating a business partner,” stated PEER Executive Director Jeff Ruch, noting that EPA has apparently not taken any steps to eliminate the actual and perceived conflicts in this arrangement. “This Navistar boondoggle takes self-dealing to a whole new dimension.”
Navistar is the only on-road heavy-duty manufacturer that has not met the NOx emission standards. Last week, Navistar’s competitors won a ruling by the U.S. Court of Appeals for the District of Columbia Circuit striking down on procedural grounds EPA’s interim decision keeping Navistar’s engines on the road. However, EPA has a pending rule to make Navistar’s singular treatment permanent. This action will also likely be challenged in court. Meanwhile, Navistar’s stock price is starting to spiral down.
Apart from conflict issues, it remains unknown whether taxpayers have gotten fair return from the huge public investment in engine research. EPA alone appears to have expended more than $250 million on its “Advanced Technology” efforts over the past decade, according to agency figures supplied to PEER.
“Is Navistar going to be a Solyndra on four wheels?” asked Ruch, referring to the half-billion dollars in federal loan guarantees lost by the recent bankruptcy of a solar manufacturer. “This episode raises questions about what role EPA should pay in industrial R&D. Is EPA a referee or a player?”