On the Road to Cleaner Air: Jail Time for White-Collar Violators?

Part I – How does a "Defeat Device" operate and why does it matter?

By Brandon Kline, Energy Law Fellow

This is the first in a four part series on the legal issues arising from the probe into an alleged nitrogen oxide trap (a "Defeat Device" in the vernacular) installed in vehicles manufactured by Volkswagen of America (VW). Part 1 describes VW’s actions in the context of the federal Clean Air Act, and explores the scope of liability that could arise under state and federal law. 

Volkswagen of America branded itself as a car with mass appeal. Award-winning television commercials featuring Golden Grandmas and a pint-sized Darth Vader led consumers to believe that they could have it all: Clean air. Clean diesel. High performance. Low price. Even Car and Driver Magazine blogged high praise for VW: “Today’s diesels are clean, quiet, and powerful…you and I know it because we’re car folks. But old myths die hard.” VW almost had everyone fooled – from the “car folks” at Car and Driver to the U.S. clean-air authorities.

During this holiday season, one thing lovers of clean air should be grateful for is the plucky team of West Virginia University researchers who set in motion the investigation that uncovered the truth behind the myth of Volkswagen’s clean-diesel cars. The researchers found that nitrogen oxide emissions – one of the six common “criteria” air pollutants regulated under the Clean Air Act – from two Volkswagen light-duty diesel engines exceeded the EPA’s emissions standard. Following the 2014 study that detected the irregularity, they shared test results with the EPA and the California Air Resources Board. Here are a few key issues that we should all keep in mind as the investigation unfolds.

1. How did the Defeat Device work?

Under the Clean Air Act and EPA regulations promulgated under it, a manufacturer is prohibited from selling or offering for sale any new motor vehicle or motor vehicle engine equipped with any device designed to “defeat” the en­gines’ emission control system. [1].

The issue surrounds VW’s efforts to top the U.S. market for efficient diesel technology while complying with strict environmental regulations. Because government testing is conducted under ideal conditions and because the technology that controls emissions undermines the car’s ability to be quick, VW seems to have engineered a device that would respond in turn. Put another way, the vehicle’s emissions system is apparently designed to comply with clean air standards under testing conditions and then disengage during normal driving conditions. So the cars appear to be “clean, quiet, and powerful.” West Virginia University tested the vehicle’s emissions under the latter conditions and discovered that nitrogen oxide emissions exceeded the federal standards. 

Internal sources familiar with the deliberations warned that employing the software was illegal; however, production pressed forward as management emphasized cost cutting, according to Automotive News.

VW engineers argued: “The only way to make the engine meet U.S. emission standards was to employ in the engine system an AdBlue urea solution used on larger diesel models such as the Passat and Touareg.” Rather than employing this costly mechanism, the company reassigned engineers and ultimately installed software in its diesel-powered cars that was designed to manipulate U.S. diesel-emissions tests.

A key issue in the days ahead is who knew what and when. As the New York Times reports, these and other questions were at the center of a Congressional hearing on the issue last month. Amid state and federal investigations, VW has hired Kirkland & Ellis LLP, the same U.S. law firm that represented BP after the largest oil spill in American history. As explained below, identifying the responsible corporate actors is important because deliberately faking emissions results could constitute a multi-layered fraud against consumers, regulators and investors.

Engine Volkswagen said the software discrepancy has occurred on Type EA 189 engines used in approximately 11 million vehicles. Diesel engines use a complex mix of sensors and filtration methods to track and limit emission levels.

Controls Information gathered by sensors measuring steering and accelerator-pedal inputs are suspected to have been used to determine when the cars are being tested for emissions, triggering more a thorough treatment of exhaust.

Under the car Modern diesel cars use a mix of devices to meet pollution limits, but they can hamper fuel consumption and other performance, automotive engineers say. Nitrogen oxides in some circumstances could be filtered more heavily based on car configuration.

Exhaust Regulators and the Center for Alternative Fuels, Engines and Emissions at West Virginia University detected variations in emissions on Volkswagen cars when they were being operated on the road to those emitted when being tested.

Note: Diagram not to scale Sources: Volkswagen; U.S. Regulators; Center for Automotive Research

2. The Defeat Device matters because it results in emissions that exceed levels necessary to protect public health and welfare.

The Clean Air Act is the comprehensive federal law that regulates air quality. The Act requires EPA to set National Ambient Air Quality Standards (40 CFR part 50) for certain criteria pollutants, including nitrogen oxide. Criteria pollutants are considered harmful to public health and the environment. Under the Act, the EPA establishes federal emission standards for engines and vehicles, including emission standards for greenhouse gas emissions. Additionally, Congress authorized California to develop more stringent engine and vehicle emission regulations than allowed under the federal rules. Thus, other states have a choice to either implement the federal emission standards, or else to adopt California requirements (CAA section 177).

The Clean Air Act requires every engine and motor vehicle within the chain of commerce (mobile sources) to meet a set of emission standards and conformity requirements. Any business wishing to sell a mobile source of air pollution within the United States must demonstrate compliance with the Act and applicable EPA regulations. Once the manufacturer has made adequate representations of conformity with these standards and the EPA has confirmed those claims through lab testing, the EPA may issue a Certificate of Conformity, which provides authorization for the manufacturer to access the U.S. market.

In November 2015, the EPA issued a Notice of Violation of the Act to Volkswagen AG, Audi AG, and Volkswagen Group of America, Inc., alleging that from 2009 until 2015, Volkswagen and Audi diesel cars equipped with 2.0 liter engines included software that circumvents EPA emissions standards for nitrogen oxides – a “defeat device,” as defined by the Clean Air Act.

On November 2, the EPA issued a second Notice of Violation to Volkswagen AG, Audi AG and Volkswagen Group of America, Inc. This notice was also issued to Porsche AG and Porsche Cars North America. These five companies are collectively referred to as Volkswagen or VW. The Notice of Violation alleges that Volkswagen developed and installed a defeat device in certain light-duty diesel vehicles equipped with 3.0 liter engines for model years 2014–16 that increases emissions of nitrogen oxide up to nine times the EPA’s standard.

Meanwhile, the California Air Resources Board has made its own determination that these actions violate state health and safety laws. As such, Volkswagen is subject to a continuing state investigation, in cooperation with the EPA on further testing of diesel engines.

Since Volkswagen did not disclose the presence of a defeat device and because it never officially justified the use of the device in its initial certification application for the vehicle’s engine components, each vehicle so equipped would not be covered by a valid Certificate of Conformity or Executive Order and would be in violation of federal and state law. In other words, Volkswagen appears to have misled authorities about the true level of noxious emissions coming out of its diesel models during real-world driving conditions, and therefore its vehicles are in violation of federal and state emissions standards.

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In Part 2, we discuss regulatory compliance and the evidence that VW’s actions resulted in premature deaths. In Part 3, we explore environmental crime prosecutions in general and the mens rea required for particular violations, in addition to the reasons why VW is not likely to be face liability for an environmental crime in connection with the Defeat Device. In Part 4 we explore the scope of VW’s liability under the Clean Air Act, as well as other legal challenges in relation to recent guidance from the U.S. Department of Justice.

[1] What the law requires: Section 203 (a)(3)(b) of the Clean Air Act (CAA), 42 U.S.C. Sec. 7522(a)(3)(b), prohib­its the manufacture, selling, or installation of any device that bypasses, defeats, or renders inoperative a required element of the vehicle’s emissions control system. Section 203 (a)(1) of the same Act also pro­hibits the sale of motor vehicles or engines that are not covered by valid certificates of con­formity. 40 CFR Part 86, Subpart A describes the regulatory requirements for defeat devices. Clean Air Act Prohibits “Defeat Devices” in Vehicles, Engines, EPA Office of Regulatory Enforcement, August 1998.