Interview: EPA says post-VW emission regime permanent, more change possible

By David Morgan

WASHINGTON (Reuters) - The tougher auto emission tests that U.S. regulators adopted in the wake of the Volkswagen cheating scandal are permanent and could lead to more regulations down the road if more problems surface, a senior Environmental Protection Agency official said on Friday.

Christopher Grundler, director of the EPA's Office of Transportation and Air Quality, told Reuters that new emission tests announced on Sept. 25 would continue "indefinitely" as part of the agency's effort to detect so-called defeat devices of the kind Volkswagen AG has admitted using to elude EPA laboratory emission tests for diesel vehicles.

Volkswagen employed a software algorithm that turned the diesel vehicles' emission controls on during lab tests but left them off during normal driving. The new EPA regime includes on-road emission tests, the approach that first raised questions about Volkswagen vehicle emissions in independent tests.

"We are permanently changing the oversight system," Grundler said in an interview. "We are integrating new tests and evaluations that we will be applying to both production vehicles and pre-production vehicles, as well as in-use vehicles."

The tougher EPA emissions test regime could add to auto industry costs.

But the scale of the Volkswagen scandal, combined with reports of potential emission hurdles for other automakers, have also raised speculation within the industry that the EPA could decide not to limit on-road tests to defeat device investigations but instead require automakers to undergo the more stringent tests while certifying new vehicles for sale in the U.S. market.

The Center for Biological Diversity, a nonprofit environmental group, petitioned EPA this week to require on-road emissions tests for all cars, sport utility vehicles, vans and light trucks.

The prospect of more stringent testing has sent automakers scurrying to shop for on-road test equipment that could be used to ensure compliance. The equipment, known as portable emissions measurement systems, are sold by a number of companies in the United States, including Japanese manufacturer Horiba Ltd, U.S.-based Sensors Inc and AVL GmbH of Austria.

"I've seen four or five serious inquiries just in the last two or three days alone," said an executive close to on-road test equipment manufacturers. "It's not just people doing research anymore. It's the manufacturers."

Grundler said the EPA is not considering more fundamental regulatory changes. But that could change if the new test methods uncover more widespread problems in the industry, he said.

"If we find through this new oversight that these problems are not limited to Volkswagen, we’ll have to face that question – whether or not we need to make any regulatory changes,” he said.

"If we do," Grundler added, "we’ve got the authority.”

The Volkswagen scandal has spawned investigations around the world, including a U.S. congressional probe that is expected to press for details of the German automaker's actions but also examine how the EPA missed the cheating strategy for years, according to aides.

A recent report from the nonprofit International Council on Clean Transportation, which commissioned research that helped uncover the Volkswagen scandal, said vehicles from Volvo AB, Renault SA and Hyundai Corp have also shown high emission levels in European tests designed to replicate on-road driving.

The report said the vehicles would have a hard time passing new environmental standards being considered in Europe.

The EPA, which has barred VW from selling new diesel models in the United States until a fix has been approved, has said it could impose penalties on the company of up to $18 billion. But Bernstein Research analyst Max Warburton estimated the agency could impose a fine of no more than $7.4 billion, saying the penalties would apply only to the first 10 cars.

But Grundler disputed that calculation: "It’s not the first 10 cars. The law provides $37,500 per violation, and the investigation will determine how many violations."

(Additional reporting by Timothy Gardner; Editing by Jonathan Oatis)