The U.S. Court of Appeals ruled on Tuesday, June 12 that Navistar, the third-biggest maker of U.S. and Cannadian truck engines, can no longer pay fines for manufacturing engines that don't comply with 2010 Environmental Protection Agency (E.P.A.) standards.  In doing so, the court shot down an interim rule that allowed Navistar to supercede EPA emissions standards by paying a fine.

The "context of this case reveals that the only purpose of the IFR is, as petitioners put it, to rescue a lone manufacturer from the folly of its own choices," the court said, according to the San Francisco Chronicle.

In 2001, the EPA issued a rule requiring a 95 percent reduction in emissions of nitrogen oxide from heavy duty diesal engines.  Most engine manufacturers took an approach that converts nitrogen oxide into nitrogen and oxygen.  But Navistar took an approach called exhaust recirculation, which didn't meet the new standards.

Navistar notified the EPA last October that it would run out of credits in 2012.  The EPA said it would allow Navistar and other manufacturers to continue making noncompliant engines if the company paid a fine of $1,919 per engine, according to the Chicago Tribune.

"We disagree with the court's ruling and will ask for a rehearing," read a Navistar company statement.  "Navistar will work with EPA to fully understand the ruling and its impact on the use of NCPs until a final rule is implemented.  At the same time, we will continue to cooperate with the EPA on the final NCP rule and will continue to work with the EPA on our 0.20g NOx certification."

The lawsuit was filed by two truck engine manufacturers, Mack Trucks Inc. and Volvo Group North America LLC.

The lack of EPA certification cost the company $10 million in penalties.  If the engine isn't certified this year, Navistar might lose $40 million, said Dan Ustian, Navistar's chief executive officer, according to the San Francisco Chronicle.

Navistar's stock also dropped several points following the ruling last week.

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