Alternative Fuel Industry Update

Volkswagen Clean Air Settlement To Fund Nearly $7 Billion In Emission Reduction Projects with Focus On Zero-Emission Vehicles and NOx Reduction Technologies

October, 2017 — Through a series of three partial settlements, the EPA has resolved a civil enforcement case against Volkswagen. These settlements resolve allegations that Volkswagen violated the U.S. Clean Air Act by the sale of approximately 590,000 model years 2009–2016 diesel motor vehicles equipped with “defeat devices” in the form of computer software designed to cheat federal emission tests. The major excess pollutant at issue in this caseis oxides of nitrogen or NOx, which is a serious health concern.

In addition to removing from commerce 85% of the illegal VW vehicles in the U.S., Volkswagen agreed to establish a trust fund intended to fully mitigate the total lifetime excess NOx emissions generated from the illegal Volkswagen vehicles.

Volkswagen has agreed to establish a Mitigation Trust Fund totaling $2.925 billion. All 50 states, Puerto Rico, the District of Columbia and Indian Tribes may elect to become a beneficiary by submitting their Mitigation Plan to the Mitigation Trustee, Wilmington Trust, N.A. The total dollar allocation is primarily based on the number of registered illegal Volkswagen vehicles within the boundaries of the beneficiary. For example, California estimates it had approximately 85,000 illegal VW vehicles or 14% of the total 590,000. As such, 14% of the total settlement amount or $423 million has been allocated for California’s Mitigation Plan. Mitigation Plans must be submitted to the Trustee by May of 2018 and funding is expected to be available for disbursement beginning in the fall of 2018.

In addition, Volkswagen must also invest $2.0 billion in Zero Emission Vehicle (ZEV) infrastructure and promotion of ZEVs. To that end, Volkswagen will invest $800 million in California and $1.2 billion throughout the rest of the nation over the next decade.

Bob Smith, Alkane Chief Executive Officer, noted: “The VW settlements have a ‘scrap and replace’ requirement primarily for 1992–2012 model years, making this a perfect market opportunity for Alkane’s new Low NOx and Electric-powered vehicles coming to market about the same time this funding becomes available. As an example, government-owned medium and heavy-duty vehicles will be eligible for maximum funding amounts equal to 100% of their replacement cost. Non-government-owned medium and heavy-duty vehicles — 75% of replacement cost for all-electric and 25% of replacement cost for Low NOx solutions. These settlement funds will at once significantly reduce harmful emissions and incentivize the alternative fuel market — potentially launching Alkane natural gas truck sales into the stratosphere. Alkane has begun an outreach program to every State VW Trust Fund Administrator advising them of our test plans to roll out our Near Zero and ZEV product lines in 2018.”