In a case arising from unfair competition claims made by a group of truck manufacturers, the U.S. Court of Appeals for the D.C. Circuit vacated a 2012 rule that provided another manufacturer with the opportunity to pay nonconformance penalties (NCP) for trucks that did not meet the Agency’s 2001 rule limiting nitrogen oxide (NOx) emissions from heavy-duty engines. 

Petitioners alleged that the Agency’s final rule contained a provision that had not been included in the proposed rule, and therefore was issued without affording the public the opportunity to comment.  The D.C. Circuit agreed. 

EPA’s attorney noted that the vacatur would “cause no harm” because the manufacturer the final rule was intended to protect no longer needed the protections afforded by the NCP rule.

‘Substantial work’

Federal rules require that engine and vehicle manufacturers meet NOx emissions standards.  However, manufacturers whose vehicles/engines do not meet those standards may still introduce their products into commerce if they pay an NCP for each nonconforming engine.  In a 1985 rule, the EPA established that three conditions must exist before the NCP provision can be applied:

• An emissions standard is more difficult to achieve, either because the standard itself becomes more stringent or because of its interaction with another new or revised standard.
• Substantial work will be required to meet the standard. 
• There is likely to be a technological laggard.

The case involves Navistar, Inc., which embarked on a technological solution to meet the federal NOx emissions limits, which differed from the approach taken by its competitors.  When Navistar informed the EPA that it would be unable to continue to meet the required limits through the use of emissions credits, the Agency came out with the 2012 rule, which was clearly intended to assist Navistar.  The contested part of that rule changed the second bulleted condition above from “Substantial work will be required to meet the standard” to “Substantial work is required to meet the standard.” 

Favorable timing

In the complicated timing of the rulemaking, the effect of EPA’s changed wording was to give Navistar protection under the NCP rule for substantial work that was required going back to 2001, rather than after 2012, when Navistar had switched to the selective catalytic reduction (SCR) approach used by the other companies to meet the NOx standard.  In other words, the EPA allowed Navistar to qualify for the NCP because of its past “substantial work” rather than its future substantial work (as specified in the 1985 rule), which Navistar, in fact, would not need to undertake.

The EPA argued that it had provided notice of this intended change through a letter to industry and a statement in the proposed rule.  But the D.C. Circuit stated that this information did not sufficiently inform the public that an amended rule was in the making.  Accordingly, the court agreed with petitioners that the EPA had not given the companies the opportunity to comment on this critical language change.  

Daimler, et al. v. EPA