House Bill Bans Volkswagen-Style Settlements

Legislation Approved by U.S. House Would Ban All Future Settlement Agreements that Make Diesel Automakers and Other Polluters Fund Environmental Projects

Read the full report here.

Washington, D.C. – In the midst of multiple investigations of automakers for installing air pollution testing “defeat devices,” U.S. House lawmakers are backing legislation that would ban all future Volkswagen-style court settlement agreements that require polluters to pay for environmental projects.

“Why keep prosecutors from negotiating settlements that require violators to help pay for environmental improvements that help offset the harm they cause?” asked Eric Schaeffer, executive director of the Environmental Integrity Project and former Director of Civil Enforcement at EPA. “Federal prosecutors working for both Republican and Democratic Presidents for decades have negotiated such agreements to get companies to cover some of the costs for improving our air and water quality, and that should continue.”

On June 28, 2016, the U.S. Department of Justice announced a consent decree with Volkswagen to settle charges that the company installed deceptive software — called “defeat devices” — to make about 590,000 of their diesel vehicles release less pollution during emissions tests than they do on the road.

The decree requires VW to provide $800 million to California and $1.2 billion to other states to help expand the use of electric cars and other “zero emission vehicles.”  VW also must pay $2.7 billion into an “Environmental Mitigation Trust” for state initiatives to reduce air pollution from cars, trucks, and off-road sources like locomotive engines or bulldozers.

As the manufacturers of GM, Fiat Chrysler, and Mercedes Benz diesel vehicles recently find themselves under investigation for possibly installing similar “defeat devices,” lawmakers in the U.S. House, led by U.S. Rep. Robert Goodlatte (R-VA), have intervened in a way that could potentially save the carmakers and other polluting companies millions or billions of dollars by banning any future VW-style settlement agreements.

The U.S. House Judiciary Committee voted 17-8 along party lines on February 7 in favor of HR 732, the “Stop Settlement Slush Fund Act,” which would ban environmental projects as part of settlement agreements.  The title for the bill is deliberately misleading, because there is no evidence these projects have been abused, lined anyone’s pockets, or funded projects not designed to reduce pollution, protect the environment or improve public health.

A similar bill was approved by a vote of 241-174 in the full House on September 7, but did not make it to the Senate.  Final votes in the House and Senate are still pending.

“This legislation is really a gift to polluting companies that don’t need it – and a blow to state and local governments, which often benefit from these environmental projects to improve the quality of life for their citizens,” Schaeffer said.

The bill would not undo the VW agreement or prohibit the courts from requiring polluters to pay penalties to the U.S. Treasury.  But it would ban any future projects to improve the environment as part of settlement agreements, such as to boost clean vehicles, rebuild wetlands, install solar panels, or improve the energy efficiency of homes.

Below are some examples of past environmental projects that would be prohibited in the future if HR 732 becomes law. (A more detailed list is in Appendix 3 of the Environmental Integrity Project report, “House Bill Bans Volkswagen-Style Settlements.”)

  • Gulf Coast: In response to a massive oil spill in the Gulf of Mexico, BP in 2012 agreed to pay $350 million to gulf coast states for research, development, education, and training to help prevent future oil spills and improve emergency response to future accidents.
  • North Carolina and Virginia: After a coal ash flood into the Dan River, Duke Energy in 2015 agreed to pay $24 million to the National Fish and Wildlife Foundation to fund stream and river ecosystem restoration projects in North Carolina and Virginia.
  • New Mexico: After being sued by the federal government for air pollution violations, the owners of the Four Corners Power Plant in New Mexico in 2015 agreed to pay $3.2 million to replace high-polluting wood burning stoves and $1.5 million to weatherize homes for the nearby Navajo Nation.
  • Indiana: The Northern Indiana Public Service Company in 2011 settled an air pollution violation case involving its coal-fired power plants in part by agreeing to spend at least $3.5 million reducing local air pollution by adding emission pollution control equipment to the diesel engines of buses.
  • Louisiana: Louisiana Generating LLC in 2012 settled Clean Air Act violations by its coal power plants in part by installing $5 million in solar panels on local schools and government buildings.

Among the lawmakers voting in favor of prohibiting future environmental projects in VW-style agreements are representatives of states that will benefit greatly from the funds provided by the German-based company as part of the VW settlement.

For example, lead sponsor, U.S. Rep. Robert Goodlatte (R-VA), represents a state that is to receive at least $88 million for clean vehicle programs as part of the VW settlement.  Co-sponsor, U.S. Rep. Darryl Issa, (R-CA), holds office in a state that is to receive about $1.4 billion as part of the VW settlement for zero emission vehicles and other projects to reduce vehicle emissions.

A full breakdown of who voted for the bill, and how much money all 50 states will receive from the VW settlement, can be found in the Environmental Integrity Project report.

The U.S. House sponsors of the bill, in their committee report, suggest that settlement funding of state and other third party environmental projects illegally diverts money owed to the U.S. Treasury, or spends federal funds for projects not authorized through Congressional appropriations.  But for decades, federal courts charged with interpreting our laws have found these consent agreements to be legal and appropriate.

The legislation is being debated at a time when investigations and legal actions over diesel “defeat devices” are spreading.

  • On May 23, the U.S. Justice Department filed a lawsuit similar to the VW legal action against Fiat Chrysler, alleging the widespread use of “defeat devices,” illegal software designed to turn off emission controls under normal driving conditions, while making sure they work well enough to pass inspection when vehicles are being tested. These dirty engines releases tens of thousands of tons of nitrogen and other contaminants that contribute to smog and fine particle pollution linked to heart and lung disease.
  • Also on May 23, German prosecutors searched Daimler’s offices last week for evidence that its engineers may have tampered with emission controls on Mercedes-Benz vehicles.
  • On May 25, a Seattle-based law firm filed a class action lawsuit against GM, claiming that the company installed software to cheat on emissions tests for about 705,000 of its diesel trucks from 2011 to 2016.

The Environmental Integrity Project is a 15-year-old nonprofit, nonpartisan organization, based in Washington D.C., dedicated to enforcing environmental laws and holding polluters and governments accountable to protect public health.

Read the full report here.