On June 12, 2012, the U.S. Court of Appeals for the D.C. Circuit struck down a U.S. EPA interim final rule that provided for the payment of nonconformance penalties ("NCPs") in lieu of meeting NOx limits for heavy-duty diesel engines. In 2001, U.S. EPA enacted a rule requiring a 95 percent reduction in NOx emissions from heavy-duty diesel engines by 2010. Most engine manufacturers developed a compliant technology called "selective catalytic reduction." One manufacturer took a different compliance approach, however, and focused on an "exhaust gas recirculation" technology. Unfortunately, this technology proved incapable of meeting the NOx emission limits set forth in the 2001 U.S. EPA rule.
Without formal notice or comment, on January 31, 2012, U.S. EPA promulgated an interim final rule which allowed the sale of non-conforming engines in 2012 and 2013 so long as engine manufacturer paid a non-conformance penalty of $1,919 per engine and met an alternate emission limit of .50 grams of NOx per horsepower-hour. Several engine manufacturers that had implemented the successful selective catalytic reduction technology challenged the interim final rule, arguing that U.S. EPA couldn't meet the "good cause" exception to the notice and comment requirements of the APA.
The D.C. Circuit Court agreed that U.S. EPA couldn't demonstrate that good cause existed to obviate the need to submit the interim final rule for notice and comment; the court therefore struck the interim final rule. The court then went on to note that although it was aware that U.S. EPA was in the process of promulgating a final rule—with the benefit of notice and comment—that would implement the NCP that was the subject of the interim final rule, "NCPs are not designed to bail out manufacturers that voluntarily choose, for whatever reason, not to adopt an existing compliance technology." Clearly, the court intended to give U.S. EPA fair warning that it would view any further efforts to provide NCPs for non-compliant engine manufacturers with skepticism. For a copy of the decision, please click here.