On March 28, 2012, the Environmental Protection Agency (“EPA”) and Department of Justice (“DOJ”) announced their first settlement of an enforcement action addressing Federal Clean Air Act (“CAA”) violations in the marine engine manufacturing and ship building industries.  Under that settlement, Coltec Industries, Inc. (“Coltec”) and National Steel and Shipbuilding Company (“National Steel”) have agreed to pay a civil penalty of $280,000 and spend approximately $500,000 on an environmental project to resolve alleged violations of the CAA and the EPA’s marine diesel engine air rules.  Coltec is a subsidiary of EnPro Industries, Inc. and operates Fairbank Morse Engines which supplies marine propulsion and ship service systems to the United States Navy and Coast Guard.  National Steel is a subsidiary of General Dynamics which designs and builds support ships, oil tankers and dry cargo carriers for the United States Navy and commercial markets.

The CAA prohibits marine diesel engines from being sold in the U.S. unless the engines are covered by a certificate of conformity and have an EPA label indicating that the engine meets applicable emissions standards.  Engines that are not certified may be operating without proper emissions controls and emitting excess carbon monoxide and nitrogen oxides.  On September 30, 2010, the DOJ filed a complaint which alleged that Coltec violated the CAA by manufacturing and selling 32 marine diesel engines that were not covered by an EPA-issued Certificate of Conformity and that National Steel violated the CAA by installing those engines in ships that National Steel built and sold to the U.S. Navy.  The complaint also alleged that the 32 uncertified Coltec engines, plus eight more certified engines Coltec sold to National Steel, had missing or improper emissions compliance labels required by EPA’s regulations.  Finally, the complaint alleged that National Steel further violated the CAA by manufacturing and selling ships containing an additional six uncertified engines. 

The settlement includes a supplemental environmental project in which Coltec and National Steel will install a NOx control system to an engine test stand exhaust stack connected to Coltec’s Beloit, Wisconsin engine manufacturing facility.  The engine test stand is used for testing large marine diesel engines.  The NOx controls required by the settlement are estimated to reduce levels of NOx by at least 85%, from approximately 102 pounds emitted per hour to approximately 16 pounds per hour.

The settlement appears to serve the purposes of all the parties.  On the one hand, the EPA sees the settlement as ensuring that engines meet requirements and encouraging environmental projects that benefit nearby communities as well as making the air cleaner not just for nearby neighborhoods but also for the Southern Wisconsin region as a whole.  On the other hand, the companies avoided a much more severe penalty that might have been imposed by a court given the breadth, number and type of violations.