With the trucking sector anticipating the release of the final rule by the Environmental Protection Agency on nitrogen oxide (NoX) standards–known colloquially as EPA ‘27–and what engines need to do to get there, one of the country’s biggest truck retailers took the issue head on its recent earnings call with analysts.
The message by William Rush, the CEO of Rush Enterprises (NASDAQ: RUSHA) and known through the industry as Rusty, was that the final rule may not be coming down anytime soon.
Rush said on the company’s earnings call with analysts Wednesday that “I’m hearing we’re not going to get it in November,” “it” being a final EPA decision following its July Notice of Proposed Rulemaking covering potential amendments to the earlier rule on NoX emissions from heavy-duty vehicles.
The initial proposed regulation and its amendments have numerous parts. But at the core, it will require about an 80% reduction in NoX emissions to get down to 0.035 g/bhp-hr, which represents grams of pollutant per brake horsepower-hour. There is no change in that basic part of the proposal.
“There have been some things that have gone in the EPA that are going to delay it,” Rush said, without offering specifics. “Possibly we’re going to be told to just work off a draft.”
EPA ‘27’s name is a reference to the model year engines where the tighter NoX rules will need to be met. And a truck retailer like Rush is going to be on the front end of whatever decisions are made by OEMs in how to meet the broader rule that is in place, either with some regulations that OEMs and others have not challenged, like the actual NoX limits, but others that are the subject of industry criticism, such as changes in warranty length.
Rush’s prediction in the earnings call: “We’ll get the final decree out in January or February, but it’s got to go on the first of January,” he said. “So it’s kind of up in the air exactly what is really going to stay the same.”
Wide backing for NCPs
The provision in the July amendments that garnered the most industry support were the noncompliance penalties (NCPs) that engine manufacturers can pay should they fail to meet the new standards. However, the NCPs are not a permanent change and will phase out.
Rush, from his perspective, is looking at OEMs that supply his retail outlets delivering NoX compliant or non-compliant vehicles on differing schedules, should the NCPs be adopted as an amendment to the original rule. “I’ve never seen an EPA law or decree where it wasn’t the same for everybody on one particular date,” Rush told the analysts. “Some will come in on January 1. Some may not do it until the following year.”
However, Rush added that “I don’t believe we’ve had time to truly test these engines.”
“So I think from a customer perspective, I would be leaning towards wanting to pay some NCPs, that’s my personal opinion, and roll in and test the new technology before I go all into the pool,” Rush said. “Let’s dive into the shallow end, not the deep end.”
‘Expiditiously’ at EPA
In a prepared statement sent to FreightWaves, a spokesman for EPA said the agency “recognizes the importance of timely action to provide regulatory certainty for manufacturers and the trucking industry. The agency is carefully reviewing the comments received and is working to finalize the rule as expeditiously as possible.”
Rush cited several OEMs by name, saying they were in favor of the NCPs. And their comments made to the EPA during the comment period on the amendments back that up.
For example, PACCAR (NASDAQ: PCAR), which Rush mentioned, said in its comments to EPA that it “strongly supports EPA’s proposal to establish nonconformance penalties for medium and heavy-heavy duty engines for the NOx standard.”
“The 2027 NOx standards meet the Clean Air Act’s criteria for nonconformance penalties, and they are critical to ensuring industry launches with robust and fully validated products rather than accelerating products to market before validation is complete,” PACCAR said in its comments.
Rush also mentioned engine manufacturer Cummins (NYSE: CMI).
Cummins, in its submission from late August, requested the EPA move quickly on the amendments, something Rush’s comments suggest is not going to occur.
“There is an urgent need for EPA to finalize some of the proposed amendments as soon as possible, for example, those related to emissions warranty, emissions useful life, and nonconformance penalties, so EPA can certify manufacturers’ model year 2027 engines to the revised provisions and manufacturers can introduce them into commerce by January 1, 2027,” Cummins said.
The reference by Cummins to other provisions under study by EPA include the questions of warranty and useful life, which are somewhat similar.
Warranty and useful life provisions
As Rush Truck Centers described it in their own Q&A on the EPA ‘27 rules, useful life “is a regulatory requirement that determines how long an engine must continue meeting federal emissions standards for certification purposes.”
As Rush Truck Centers added, the proposed amendment would not implement tighter useful-life standards until 2030, giving a three-year breather.
The warranty changes in the amendment would keep current requirements in place rather than the original changes, which would have forced OEMs to recognize longer warranties. It has been noted by several of the commenters on the amendments that this change alone is expected to have the greatest financial impact on restraining increases on the price of the cleaner trucks created by the EPA ‘27 rule.
Warranty table is from Rush Enterprises’ web page
Rush on the earnings call referred to the EPA sarcastically as “our great government that can’t seem to write a final decree.” But he softened that by saying that “I know there are a lot of legal ramifications. They have to be very careful with the changes. They have tried to make it easier for the customers.”
The NCPs, Rush said, will allow greater testing of the tighter NoX engines without actually adopting them in fleets.
“Most folks want to run this stuff for over a year before they roll it into their fleets, because we’ve seen through history that new technology does not always run right out of the gate,” Rush said.
The rollout of diesel exhaust fluid (DEF) in 2010, Rush said as an example, resulted in “clogged particulate filters all over the country.”
DEF gets some changes in the proposed amendments. Despite some online misinterpretation that the rule for diesel engines to use DEF is disappearing, what would change in the amendments would be the elimination of the “deratement,” where low DEF levels result in engines slowing the vehicle they are powering. Instead, audio alerts would replace them.
ATA reiterates NCP backing
In a coincidence, the American Trucking Associations had already made its views on the proposed amendments known during the comment period, but about the same time Rush was making its comments, the ATA used the group’s blog last week to reiterate its view on the changes in EPA ‘27.
The blog post was put up by ATA, according to a spokesman, “because the rule is up for interagency review in the coming weeks and it reiterates our stance on the rule. Congress left town, but this is content that speaks to important activity happening at the agencies.”
Like the OEMs made clear in their own comments, the ATA favors the NCPs as a key transition tool.
ATA said of the changes in general that they “lay out a responsible path forward, maintaining ambitious NOx emissions reduction targets while recognizing that manufacturers need sufficient time to test new technologies under real-world operating conditions.”
“NCPs preserve the incentive for manufacturers to meet the new standard as quickly as possible while preventing reliable engine models from becoming unavailable in the market,” the ATA said. “As EPA prepares to finalize its rulemaking, the NCP provisions must remain intact. Without them, the rule would lose a critical safeguard for truck availability, fleet reliability, and an orderly transition to the next generation of emissions technology.”
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