United States: Court Approves Volkswagen Partial Consent Decree: Tribes Entitled To $50 Million For NOx Emission Mitigation

Last Updated: November 14 2016
Article by Pilar Thomas

On October 25, 2016, the federal district court in the Northern District of California approved the United States' Amended Consent Decree to resolve claims against German automaker Volkswagen AG and related entities (VW) and to settle allegations of cheating emissions tests, deceiving customers, and excess nitrous oxides (NOx) emissions from VW and Audi diesel engine vehicles. VW agrees to spend up to $14.7 billion as part of the settlement, and Tribes are eligible to obtain funding for mitigation efforts under the consent decree.

There are three programs included in the Amended Consent Decree: 1) VW must offer consumers a buyback and lease termination or an approved emission modification, for VW and Audi model year 2009-2015 2.0-liter diesel vehicles sold or leased in the U.S., spending up to $10.03 billion to compensate consumers under the program; 2) creation of a mitigation trust account, funded at $2.7 billion, for states and tribes to mitigate the pollution from these cars; and 3) VW must make a $2 billion investment in projects to support the use of zero emission vehicles.

VW and Audi Buy-Back or Repair

For VW and Audi vehicles, model years 2009 – 2015, with 2.0-liter diesel engines, VW is required to buy back or terminate the leases for these vehicles, at the fair market value as of September 17, 2015. In lieu of buying back vehicles, VW can repair the vehicle, if EPA has approved an emission repair program. The Amended Consent Decree calls for at least 85% of the affected vehicles to be either taken off the road or repaired. Tribal members who own or lease these types of vehicles will receive a direct notice from VW, but, if they have any questions, they should check the VW claim settlement website at: www.vwcourtsettlement.com. Vehicle owners will have 2 years to sell back or repair their vehicles.

Mitigation Trust Account and Agreement

The Amended Consent Decree establishes a $2.7 billion trust account to be used to reduce NOx emissions from diesel engines. The trust account will be administered by a trustee, and controlled by the mitigation trust agreement.

The primary role of the trustee is to manage and distribute funds to beneficiaries – states and tribes – for approved Eligible Mitigation Actions. The trust fund includes a Tribal Allocation Sub-Account for Tribes totaling just under $50 million. Up to 5% of these funds can be used for technical assistance to help Tribes prepare funding requests.

Based on the approval date of the Amended Consent Decree, funding for Tribes from the Tribal Allocation will likely first be available in September 2017, and will be available for six years. The Trustee must provide notice when funding requests can be submitted by Tribes. To receive funding from the Trustee for Eligible Mitigation Activities, Tribes must submit a funding request to the Trustee and establish "Beneficiary" status with the Court by filing a required certification at the same time the tribe submits its funding request to the Trustee. Tribes are also able to apply for emission mitigation funds through the states. Eligible mitigation actions include projects to reduce NOx from heavy duty diesel sources (i.e. replacing engines in large trucks, school buses, heavy equipment, forklifts, marine engines, and stationary diesel engines). See Amended Consent Decree, Appendix D-2 for specifically approved actions.

Zero Emission Vehicle Infrastructure

The third "mitigation" program included in the Amended Consent Decree is approximately $2 billion for programs and infrastructure to support zero emission vehicles (ZEV). Tribes may be eligible to apply for this funding. The ZEV program includes funding to build out charging stations, promote the use of ZEV, and provide brand-neutral education on ZEV. The program allocates $800 million to California and $1.2 billion across the rest of the country. The EPA will be responsible to approve the national ZEV investment plans proposed by VW, and the California Air Resources Board will approve the California plans. VW is required to provide notice of opportunities to comment on these investment plans. Tribes interested in providing comments or input to VW on how to include Tribes in the ZEV investment plans should monitor the following websites: www.vw.com and www.vwcourtsettlement.com.

Further information about the VW partial settlement and consent decree can be found at the EPA website. The National Tribal Air Association has also developed a Policy Response Kit and Fact Sheet, and is sponsoring a VW Working Group for Tribes to provide input on potential trustees, and other continuing interactions with the Department of Justice and EPA.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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