$100M Clean Air Act Settlement Approved

(CN) - A federal judge approved $100 million settlement between the federal government and the Hyundai and Kia Motor Companies, affixing her signature to the largest civil penalty ever paid for violation of the Clean Air Act.

The Korean automakers, also agreed to forfeit $200 million in greenhouse-gas emission credits the companies claimed to have earned by building vehicles with lower emissions than required by law.

The settlement further commits the companies to spend about $50 million on preventing future violations. Such measures include reorganizing emissions-certification groups, revising test protocols and improving management of test data, according to the government's release.

The settlement ends a federal lawsuit filed by the U.S. Department of Justice, the Environmental Protection Agency, and the California Air Resources Board that claimed the design specifications of 1.2 million Hyundai and Kia cars and SUVs did not conform to the specifications the companies certified to federal government.

As a consequence, the greenhouse-gas emissions claims of the companies were dramatically understated, the plaintiff agencies claim.

At issue are Hyundai's Accent, Elantra, Veloster and Santa Fe vehicles, and Kia's Rio and Soul vehicles manufactured in 2012 and 2013.

Regulators also accused Hyundai and Kia of misinforming drivers about the real-world fuel-economy performance of many of these vehicles. Hyundai and Kia overstated the fuel economy by one to six miles per gallon, depending on the vehicle, the complaint said.

The EPA allegedly discovered the violations during routine auditing in 2012. A subsequent investigation revealed that Hyundai and Kia's testing protocol included numerous elements that led to inaccurately higher fuel-economy ratings. In processing test data, Hyundai and Kia allegedly chose favorable results rather than average results from a large number of tests.

In accepting the settlement, U.S. District Judge Tanya Chutkan held the agreement "is fair, adequate, reasonable, appropriate, and serves the public interest."

She went on to note, "All the parties involved-the United States, CARB, and the Defendants - support entry of the decree. ... There is no suggestion of impropriety in the negotiation of the agreement, and all the parties were represented and advised by competent technical and legal staff. ... The parties have reached an agreement that remedies the alleged violations and holds Defendants accountable for emissions testing and reporting going forward. In addition, the United States complied with the notice-and-comment procedures required by the CAA and received six comments, all of which received due consideration."

Under the terms of the settlement, the U.S. government will receive $93.6 million in fines, while California, will receive $6.4 million.

"The fine is the largest in the history of the Clean Air Act, and is both adequate and appropriate given the underlying conduct of the Defendants and as a deterrent to future CAA violations," Chutkan wrote. "In addition, the forfeiture of greenhouse gas credits corresponds to the amount of greenhouse gas emissions that were underreported as a result of Defendants' allegedly false reporting to EPA. This is a reasonable punishment which addresses the underlying violation and puts Defendants in the position they would have been absent their allegedly unlawful conduct.

"The forfeiture also ensures the integrity of the CAA emissions trading system by preventing improper credits from artificially inflating the market. The injunctive relief is also reasonable and appropriate as it ensures that Defendants will take steps to prevent future violations and address any institutional problems that cannot be addressed by a monetary (or quasi-monetary) penalty alone," the judge wrote.

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