Volkswagen Mitigation Trust


Volkswagen Settlement

Arkansas is poised to receive $14,647,709.09 toward projects that reduce emissions from motor vehicles as a result of two partial consent decrees in a case filed against Volkswagen for alleged violations of the federal Clean Air Act by the sale of approximately 500,000 model year 2009 – 2015 vehicles containing 2.0 liter (L) and approximately 80,000 model year 2009 – 2016 3.0 (L) diesel engines equipped with emissions control defeat devices.

The air quality in Arkansas is among the best in the nation and these settlement funds provide an additional opportunity for Arkansas to realize further improvement in air quality with respect to nitrogen oxides (NOx), ozone, and fine particulate matter. This funding can be leveraged to help state and local agencies, schools, and organizations replace aging high-emitting vehicles and equipment with newer, cleaner vehicles and equipment. The designated lead agency will reach out to the public as it plans how best to utilize the $14.6 million gained from the Volkswagen settlement in our state.

Legal Proceedings

In September 2015, EPA alleged that Volkswagen had installed software that renders certain emission controls inoperable in turbocharged direct injection (TDI) diesel Volkswagen and Audi vehicles. These defeat devices resulted in up to 40 percent higher nitrogen oxide emissions during normal driving.

In January 2016, the United States and the State of California filed a lawsuit against Volkswagen alleging that the manufacture and sale of diesel cars with systems intended to defeat emissions tests were in violation of section 203 of the Clean Air Act.

On June 28, 2016, a partial consent decree addressing 2.0 L subject vehicles was proposed, and the public was provided a thirty-day period to comment on the proposed partial consent decree. The comment period closed on August 5, 2016.

On October 18, 2016, the U.S. District Court for the Northern District of California held a hearing on the partial consent decree including amendments made in response to public comment. On October 25, 2016, the court granted the motion to enter into the amended partial consent decree. The approved partial consent decree consists of three major parts:

  • Volkswagen will buy back, terminate leases, or provide approved emissions modifications for subject 2.0 L TDI diesel vehicles.
  • Volkswagen will invest $2 billion over ten years in projects that increase the use of zero emission vehicles.
  • Volkswagen will pay $2.7 billion to an Environmental Mitigation Trust to fund projects to reduce emissions of NOx. Arkansas’s initial allocation under the first partial consent decree is $13,951,016.23.

On December 20, 2016, a second partial consent decree addressing 3.0 L subject vehicles was proposed. Notice of the second consent decree was published in the Federal Register on December 29, 2016 opening a thirty day comment period. On February 2, 2017, the comment period was extended February 14, 2017. The proposed partial consent decree consists of two major parts:

  • Volkswagen will buy back, terminate leases, or provide approved emission modifications for subject 3.0 L vehicles.
  • Volkswagen will be required to pay an additional $225,000,000 to the Environmental Mitigation Trust. Arkansas’s initial allocation under the second partial consent decree is $696,692.86.

On January 11, 2017, a third partial consent decree was proposed to address Volkswagen’s liability under the Clean Air Act for civil penalties and injunctive relief to prevent similar future violations. Notice of the third consent decree was published in the Federal Register on January 24, 2017 beginning a thirty day public comment period that closes on February 23, 2017.

Environmental Mitigation Trust

Under two partial consent decrees, Volkswagen has agreed to pay $2.9 billion to create an Environmental Mitigation Trust to fund projects that reduce NOx emissions. This money is allocated to states, tribes and territories based on the proportion of subject vehicles registered in each jurisdiction. Upon approval of a mitigation plan by a court appointed trustee, Arkansas is to receive $14,647,709.09 to use toward funding eligible mitigation actions to reduce NOx emissions agreed to in the first partial consent decree. Arkansas will seek public input as it selects from the eligible mitigation actions below to develop a Beneficiary Mitigation Plan for Arkansas.

Eligible Mitigation Actions:

Eligible Equipment/Vehicles:

  • Model Years 1992 – 2009 Class 8 Local Freight or Drayage Trucks

Project Funding:

  • Non-government Owned:
    • 40% for engine repower with new diesel or alternative fueled engine
    • 25% for new diesel or alternatively fueled freight truck, e.g., CNG, propane, hybrid
    • 50% for new diesel or alternatively fueled drayage truck
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric vehicles, including charging infrastructure
  • Government Owned:
    • 100% for engine repower with new diesel or alternatively fueled engine
    • 100% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric vehicles, including charging infrastructure

Eligible Equipment/Vehicles:

  • Model Years 1992 – 2009 School Buses, Shuttle Buses, or Transit Buses

Project Funding:

  • Non-government Owned Buses:
    • 40% for engine repower with new diesel or alternative fueled engine
    • 25% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric vehicles, including charging infrastructure
  • Government Owned Buses and Privately Owned School Buses under Contract with a Public School District:
    • 100% for engine repower with new diesel or alternatively fueled engine
    • 100% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric vehicle, including charging infrastructure

Eligible Equipment/ Vehicles:

  • Pre-Tier 4 switcher locomotives operating 1,000 or more hours per year

Project Funding:

  • Non-government Owned:
    • 40% for engine repower with new diesel or alternative fueled engine, including generator sets
    • 25% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid, generator sets
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric vehicle, including charging infrastructure
  • Government Owned:
    • 100% for engine repower with new diesel or alternative fueled engine, including generator sets
    • 100% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid, generator sets
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric vehicle, including charging infrastructure

Eligible Equipment/ Vehicles:

  • Ferries and Tugs with Tier 0, Tier 1, or Tier 2 Engines

Project Funding:

  • Non-government Owned:
    • 40% for engine repower with new diesel (Tier 3 or 4) or alternative fueled engine
    • 75% for engine repower to all-electric engine, including charging infrastructure
  • Government Owned:
    • 100% for engine repower with new diesel (Tier 3 or 4) or alternative fueled engine

Project Funding:

  • Non-government Owned:
    • 25% for costs associated with shore-side system
  • Government Owned:
    • 100% for costs associated with shore-side system

Eligible Equipment/ Vehicles:

  • Model Years 1992 – 2009 Class 4 – 7 Trucks

Project Funding:

  • Non-government Owned:
    • 40% for engine repower with new diesel or alternative fueled engine
    • 25% for new diesel or alternatively fueled freight vehicle, e.g., CNG, propane, hybrid
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric vehicle, including charging infrastructure
  • Government Owned:
    • 100% for engine repower with new diesel or alternatively fueled engine
    • 100% for new diesel or alternatively fueled vehicle, e.g., CNG, propane, hybrid
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric vehicle, including charging infrastructure

Eligible Equipment/ Vehicles:

  • Tier 0, Tier 1, or Tier 2 diesel powered airport ground support equipment or uncertified or certified to 3 gm/bhp-hr spark ignited engine powered airport ground support equipment

Project Funding:

  • Non-government Owned:
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric vehicle, including charging infrastructure
  • Government Owned:
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric vehicle, including charging infrastructure

Eligible Equipment/ Vehicles:

  • Forklifts with greater than 8,000 pounds lift capacity and Port Cargo Handling Equipment

Project Funding:

  • Non-government Owned:
    • 75% for engine repower to all-electric engine, including charging infrastructure
    • 75% for new all-electric forklift or port cargo handling equipment, including charging infrastructure
  • Government Owned:
    • 100% for engine repower to all-electric engine, including charging infrastructure
    • 100% for new all-electric forklift or port cargo handling equipment, including charging infrastructure

Eligible Equipment/ Vehicles:

  • Level 1, 2, or fast charging infrastructure located in a public place, workplace, or multi-unit dwelling or fueling equipment capable of dispensing hydrogen at a pressure of 70 megapascals located in a public place

Project Funding:

  • 100% of the cost to purchase, install, and maintain charging equipment available to the public at a government owned property
  • 80% of the cost to purchase, install, and maintain charging equipment available to the public at a non-government owned property
  • 60% of the cost to purchase, install, and maintain charging equipment available at a workplace or multi-unit dwelling but not to the general public
  • 33% of the cost to purchase, install, and maintain hydrogen fuel cell vehicle supply equipment capable of dispensing at least 250 kg/day, available to the public
  • 25% of the cost to purchase, install, and maintain hydrogen fuel cell vehicle supply equipment capable of dispensing at least 100 kg/day, available to the public

States may use trust funds for their nonfederal voluntary match or overmatch for programs implemented under DERA. For more information about Arkansas’s DERA program please visit ADEQ Go RED!

Next Steps for Arkansas

California, participating states (including Arkansas), and tribes will recommend potential trustees to manage the Environmental Mitigation Trust by November 24, 2016. On November 10, 2016, Governor Asa Hutchinson sent a letter to the United States Department of Justice and EPA providing recommendations for their consideration in the selection of the trustee and stating his intention of naming ADEQ as the lead agency to develop and implement a plan to utilize the Environmental Mitigation Trust funds for projects that reduce NOx emissions in Arkansas. Once a trustee is selected by the court and the court approves the final version of the trust (establishing a trust effective date), states will have sixty days to submit a certification form, signed by the governor, that explains how the state qualifies to be a beneficiary under the trust, designates a lead agency to participate in the trust, and commits to the terms of the trust agreement. The trustee will provide notice of beneficiary designation within 120 days after the trust effective date.

Once Arkansas is designated as a beneficiary, the State will have ninety days to develop and submit a Beneficiary Mitigation Plan that summarizes how funds from the Environmental Mitigation Trust will be used. This plan must include the following elements:

  1. The goal for use of the funds allocated under the trust
  2. Eligible mitigation actions selected and the percentage of funds to be used for each action
  3. A description of how the beneficiary will consider the beneficial impact of the actions in areas that bear a disproportionate share of air pollution
  4. A general description of emissions benefits

Arkansas will solicit input from the public as the State develops its Beneficiary Mitigation Plan.