USEPA’s “Partial Settlement” with Volkswagen Earmarks $38.9 million for Indiana Diesel, Nox Emission Reduction Projects

Following months of negotiation, the federal Justice Department and Environmental Protection Agency (EPA) reached a “partial settlement” with Volkswagen over the company’s admitted practice of vehicle tampering to falsify emissions testing results. This illegal activity resulted in hundreds of tons of pollution being emitted by VW’s diesel vehicles over several years, across the US.

The consent decree submitted to the courts includes three initiatives:

  1. Recall of 85% of affected vehicles through buy backs and lease termination, and emissions modifications
  2. Creation of a $2.7 billion national fund to remediate NOx emissions, particularly impacts on disadvantaged communities
  3. Investment of an additional $2 billion on zero emission vehicles and infrastructure to support recharging or refueling.

The second initiative, related to NOx mitigation from older diesel engines, is where the Indiana earmarked funds focus. It is anticipated that the EPA will address the zero emission vehicle component in future communications.

The following is what we know today and what the “next steps” will be for Indiana to obtain their designated allotment.

The open comment period ended August 5th.   Submitted comments will be reviewed by the courts and EPA to determine if the proposed items outlined above are adequate and sufficient penalties for the fraudulent environmental infractions.

If deemed appropriate, the $2.7 billion will be placed into a remediation trust and the courts will appoint a trustee. The earmarked funds allocation was determined by EPA and based on an analysis of BMV records, from each state, which disclosed the number of offending VW vehicles registered.

To receive our $38.9 million earmark, Governor Pence’s office, or designated state agency, once a court appointed trustee is identified, has 60 days to submit a “beneficiary certification form” indicating Indiana wants their allotted funds.  When Indiana is confirmed as a “benefactor of funds” the Governor’s office then has 30 days to file their “beneficiary remediation plan.”

As outlined in the consent decree, the states must seek public/stakeholder input on their plan, prior to it being submitted to EPA.  Additional guidelines in the consent decree require states to follow project and cost parameters focused on repowering or replacing old diesel engines with new diesel, alternative fuel or electrified vehicles. On road projects are eligible as are marine projects that eliminate idling while vessels are docked, airport mitigation, and other Nox reduction projects.  The key is elimination of higher pollution diesels that impact, in particular, low income and disadvantaged communities, and communities disproportionately impacted by nitrogen oxide (NOx) pollution. There may be cost-sharing requirements for projects.

A final settlement determination by the courts is not expected for 4 – 6 months. EPA cautions that plans and funding levels may change. However, stakeholders are encouraged to work with their individual states and appointed agencies in the brain-storming of projects and programs for use of the funds when the court records the consent decree.

A web-based fact sheet with details is available at www.EPA.gov/VW. Emails can be directed to VW_settlement@epa.gov

Based on what we know, it is certain that these funds have the potential to benefit public and private sector fleets, across Indiana, and Greater Indiana Clean Cities stakeholders by providing funding opportunities to deploy natural gas, propane or electric vehicle/equipment, both on and off road.  The Indiana Department of Environmental Management, is keeping the Governor’s staff abreast of the consent decree status.  Although the exact use of the funds is yet to be determined, it is anticipated that some of the funds will be folded into their current, DERA Funded, Indiana Dieselwise, program, the existing diesel vehicle emissions mitigation program for Indiana.  However, based on the information from the USEPA, the rules of this WV fine-based program are likely to be slightly different than the DERA program. Specifically, eligibility for these VW funds is broader, including all areas where the offending VW vehicles operate(d) to “fully mitigate the total, lifetime excess NOx emissions from the 2.0 Liter Subject Vehicles where the 2.0 Liter Subject Vehicles were, are or will be operated;” (sourced from Appendix D Form of Environmental Mitigation Trust Agreement of the Partial Consent Decree), which would most likely include non-attainment areas.

The process will take time to play out and nothing will happen until the final settlement with VW is accepted by the courts, as long as 6 months or more.  Once accepted and filed, things will happen quickly.  It is possible that founds could be available as early as late 2017, but most likely early 2018, with a 3 year roll out of all funds, so approximately $13 million per year.

Greater Indiana Clean Cities will continue to monitor the situation and have engaged with IDEM to assist through the process of developing a mitigation plan.

Plan to join us on September 23, 2016, from 830 – 10a for a stakeholder meeting, where additional details on eligible projects and opportunity for comments will be available.  Like and follow us on Facebook and Twitter where we will keep our stakeholders informed on how we are working for you to create solutions that benefit Hoosier’s environmentally and economically.

Kellie L. Walsh, Executive Director
Greater Indiana Clean Cities Coalition, Inc.