Citing new information on costs and other issues, the American Trucking Associations has asked the Environmental Protection Agency to withdraw its rule establishing emissions standards for model year 2004 heavy-duty diesel engines and launch a new rulemaking based on current information. In a June 19 petition to EPA, ATA also endorsed a similar joint petition filed in March by Schneider National, Crete Carrier Corp., Penske Truck Leasing, Swift Transportation, U.S. Xpress and Werner Enterprises.
Although ATA’s 14-page document barely mentions the consent decree between EPA and diesel engine manufacturers, the petition for reconsideration would, if granted by EPA, effectively terminate the Oct. 1 deadline. The consent decree essentially pulls the 2004 regulations forward. If the 2004 rule goes away, so does the consent decree.
ATA’s petition is based on several recent developments. First is EPA’s proposal early this year to establish a schedule of non-conformance penalties regarding the 2004 rule and the consent decree. As part of that proposal, EPA released its most recent estimates of costs associated with the new engines. ATA agrees with the major carriers’ earlier argument that the costs outlined by EPA will cause trucking operations to defer acquiring new engines and, therefore, disrupt the emissions benefits EPA seeks to achieve.
In late May, ATA received a copy of a report by National Economic Research Associates (NERA) and Air Improvement Resources (AIR) on the likely effects of the new 2004 technology engines. NERA was the economic research group that evaluated the hours-of-service proposal for ATA two years ago. ATA also drew information for its petition from statements of position Detroit Diesel submitted in May regarding disputes with EPA over implementation of the consent decree.
In its petition, ATA argued that EPA incorrectly estimated or ignored the cost of the new engine itself, the fuel economy penalty, maintenance costs, reliability, residual values of trucks equipped with new engines and the economic impact on the trucking industry and small businesses.
In documents accompanying the 2004 rule, EPA estimated that the new emission standard would add $803 to the initial cost of a new heavy-duty diesel engine. EPA itself now estimates that increase to be closer to $9,000, ATA said.
EPA’s underestimate of the life-cycle cost is even greater, ATA said. According to the NERA/AIR report, increased costs with the purchase and operation of new exhaust gas recirculation engines will be between $11,057 and $15,892 per engine. EPA had estimated $907.
“The enormous disparity between EPA’s original cost estimates and the true costs associated with the 2004 rule renders the cost/benefit justification of the rule invalid and warrants the agency to grant this petition in order to properly reconsider the cost effectiveness of the 2004 rule,” ATA said.
The fuel economy issue alone justifies reconsideration of the 2004 rule, ATA suggested, because EPA has reversed its conclusion about the effect of new engines on fuel usage. When it issued the 2004 rule, EPA projected no loss of fuel economy.
Yet in a proposed rule earlier this year on setting non-conformance penalties, EPA indicated that it expected a fuel economy reduction of 2.5 to 5 percent. That translates to almost $1,000 a year in increased operating costs. The NERA/AIR report concludes that the fuel economy penalty associated with the 2004 rule will cost between $3,620 and $7,130 over the life of the engine.
Much of ATA’s petition addressed maintenance requirements and costs EPA did not take into account in the 2004-engine rulemaking. For starters, new EGR engines incorporate new technologies such as variable-geometry turbochargers, exhaust-related heat exchangers, and new exhaust configurations, ATA noted. Engine maintenance technicians are unfamiliar with these technologies and will require extensive training to understand them.
Unforeseen maintenance problems and potential engine failures will occur until engine manufacturers overcome the difficulties in neutralizing the effects of sulfuric and nitric acid in EGR-fitted engines, ATA said. Until then, acids will find their way into combustion chambers, past the rings and into the crankcase.
For many applications, more frequent oil and filter changes will be required, increasing labor, oil, parts costs and truck downtime. According to some estimates, oil changes will be twice as frequent on trucks equipped with EGR technology, ATA said.
Other maintenance issues, ATA said, include damage from inadvertent use of oils not approved for use in EGR engines; the unknown effects of increased heat on parts and components in the engine compartment; the effects of EGR on coolants; the availability and pricing of replacement parts; and the uncertainty over when newly engineered components will fail. “Engine maintenance technicians will be dealing with these serious concerns on a daily basis and can hopefully troubleshoot problems before they evolve into serious safety issues threatening both drivers and the public,” ATA told EPA.
“In an industry where on-time deliveries make or break your business, unreliable and untested equipment has no place,” ATA told EPA. Normally, engine manufacturers provide several new engines to fleet owners for extensive field-testing, each involving operation over hundreds of thousands of miles, the association said.
Carriers typically require two full years to sufficiently test engines running them through complete, four-season cycles under varied operating conditions, ATA told the agency. But only a handful of certified engines are operating in actual motor carrier fleets.
“The trucking industry equates ‘untested’ engines as ‘unreliable’ engines and for good reason,” ATA said. “Too much financial risk is at stake in the highly competitive world of trucking to purchase anything less than a fully tested engine.”
ATA argued that motor carriers that buy trucks equipped with EGR engines will face a “severe financial hardship” because those trucks will be valued far below today’s trucks in the used truck market due to lower fuel economy, shorter life cycles and increased maintenance requirements.
EPA never considered lower residual values in analyzing the costs and benefits of the 2004 rule, ATA said. The agency should reevaluate the regulation and determine all impacts, including the effect of lowering residual values for trucking companies, it said.
EPA’s forecast in the 2004 rule of the environmental benefits is unrealistic, ATA argued. Many fleet managers will hold existing equipment for longer periods and incur higher maintenance costs rather than accept the increased acquisition costs, reduced fuel economy, uncertain maintenance requirements and lower residual values inherent in new trucks, the association told EPA. Those that do decide to purchase will either “pre-buy” existing technology or buy used.
In response to the increased life-cycle costs of new trucks, older equipment will be operated far longer than EPA anticipated, ATA said. As a result, NERA/AIR places the cost per ton of reduced NOx between 2004 and 2006 at $5,238 compared to the $200 per ton EPA estimated when it issued the 2004 rule. The $5,238 figure is several times the cost per ton of regulations reducing emissions from other mobile sources, ATA said.
“The dramatic cost increases associated with the 2004 rule could potentially wreak havoc on the trucking industry, which is dominated by small businesses that are ill-equipped to absorb such enormous increases in operational costs,” ATA told EPA.
A small trucking company cannot absorb the $8,940 initial increase in the cost of a 2004-compliant engine, ATA said. According to DOT statistics, the average profit margin in 2000 was 2.8 percent. Those numbers drop for smaller carriers to 1.2 percent for those between $5 million and $20 million in annual revenues and 1 percent for carriers with less than $5 million.
“While all motor carriers will suffer from paying dramatically higher prices for new trucks, it is precisely these small carriers that could find the increased costs detrimental to their continued survival,” ATA said. ATA’s own analysis of the economic impact is conservative because the association did not address the economic impact on the truck manufacturing industry.