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Sep 6, 2012 4:14 PM

Engine makers will be  allowed to produce and sell “heavy heavy-duty diesel engines” that do not meet  the Environmental Protection Agency’s (EPA) current 2010 NOx emission limit by  paying penalties to the federal government on a per-engine basis, according to  the Final Rule Noncomformance Penalties (NCPs) issued by the EPA.

  The Final Rule keeps  the NCP avenue to the engine marketplace open and that is very good news for Navistar, which had depended on  paying the penalties to enable it to continue supplying engines to truck OEMs  while it continued working to  achieve full EPA- 2010 compliance for the engines it manufactures with a  solution that includes SCR technology.

  EPA’s Interim Rule on  NCPs had been dismissed by the U.S. Court of Appeals for the District of  Columbia Circuit. The court, ruling  on a lawsuit brought by Navistar competitors Cummins Inc.; Daimler Trucks  North America and its subsidiary Detroit Diesel; and by sister OEMs Mack Trucks and Volvo Trucks North  America, said EPA erred when it issued a rule allowing Navistar to pay NCPs on  engines that did not meet EPA rules requiring less than 0.20 grams of NOx.

  “We are pleased that  the U.S. Environmental Protection Agency has issued the Final Rule for  Nonconformance Penalties (NCPs) for on-highway heavy heavy-duty diesel  engines,” said Troy Clarke, Navistar’s president & COO, in a statement.

  “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,” he continued.

  Clarke added that  “Implementation of the Final NCP Rule will have no impact on our vehicles  previously certified by the EPA under the Interim NCP Rule.”

  EPA Administrator Lisa  Jackson yesterday signed the Final Rule. Its summary stated that the agency is  “taking  final actionto establish nonconformance penalties (NCPs) for manufacturers  of heavy heavy-duty diesel engines (HHDDE) in model years 2012 and later for  emissions of oxides of nitrogen (NOx) because we have found the criteria for  NCPs in [Interim NCP Rule] 40 CFR 86.1103-87 and the Clean Air Act have been  met.”  

  EPA said NCPs allow a  manufacturer of heavy-duty engines whose engines do not conform to applicable  emission standards, but do not exceed a designated upper limit, to be issued a  “certificate of conformity” upon payment of a monetary penalty to the U.S.  Government.

  EPA pointed out that  the “upper limit associated with these NCPs is 0.50 grams of NOx per brake  horsepower-hour (g/bhp-hr). This Final Rule specifies certain parameters that  are entered into the preexisting penalty formulas along with the emissions of the  engine and the incorporation of other factors to determine the amount a  manufacturer must pay. Key parameters that determine the NCP a manufacturer  must pay are EPA’s estimated cost of compliance for a near worst-case engine  and the degree to which the engine exceeds the emission standard (as measured  from production engines).”

  EPA noted in its Final  Rule summary that it has proposed NCPs for “medium heavy-duty diesel engines”  as well. However, the agency stated that it is “not taking final action with regard  to NCPs for these engines at this time because EPA has not completed its review  of the data and comments regarding these engines.”  

  An unrelated  development that also occurred yesterday, per a Chicago  Tribune news story, “Navistar said Thursday it will resort to  involuntary layoffs to meet its ‘targeted cost reduction goals,’ according to a  filing with the Securities and Exchange Commission. Navistar expects the costs  associated with buyouts and layoffs to be between $40 million and $60 million.”