Trump Budget Would Slash Funds for EPA Vehicle Lab

(Bloomberg) -- The Trump administration is proposing to slash the vehicle emissions and fuel economy testing operation that helped root out Volkswagen AG's emissions cheating, and seeks to fund those functions from higher fees collected from manufacturers.

The administration's budget proposal would cut $48 million from the U.S. Environmental Protection Agency's program responsible for producing new car fuel economy labels and certifying that new vehicles, engines and fuels conform with clean air standards, nearly all of its current non-pay funding level.

It would also cut 168 of the roughly 300 full-time positions in the operation, called the Federal Vehicle and Fuels Standards and Certification program, according to an internal EPA budget memo released by a government employee union.

“This is an effort to shut down the operations of the Office of Transportation and Air Quality,” said Margo Oge, former director of the department until 2012.

Prior story: Lead Poisoning, Oil-Spill Programs Targeted for Cuts at EPA

Spokespeople for the EPA didn't respond to emailed requests for comment.

Trump's budget proposal calls to cut the EPA's overall funding by 31 percent. It is the first step in the process to create the federal budget and is subject to congressional scrutiny.

Jeff Holmstead, a former assistant administrator at the EPA, downplayed the potential that shifting the program to one funded by fees would disrupt its core functions, saying Congress would be unlikely to approve a plan that would hurt manufacturers' ability to sell their products in a timely manner.

“That's unacceptable to industry and to the EPA,” he said. “An awful lot of economic activity depends on their ability to get certificates of conformity.”

According to the budget memo, legislation would be introduced to fund the department and restore the eliminated jobs through higher fees collected from manufacturers. The program currently collects about $20 million per year.

The cuts would also affect the EPA personnel responsible for the mid-term evaluation of the agency's 2025 vehicle efficiency standards.

“I personally believe if this budget goes as it is, then Congress will restore some of it,” Oge said.

The proposed cuts were previously reported by Reuters.

The EPA department targeted by the cuts is in charge of certifying that vehicles and engines made by automakers and other manufacturers meet clean air standards, which are required before they can be sold. Much of that work is done at the EPA's lab in Ann Arbor, Michigan, which also monitors manufacturer compliance with U.S. clean air standards and played a major role in uncovering recent auto industry scandals, including Volkswagen AG's emissions cheating in 2015 and overstated fuel economy ratings by Hyundai Motor Co. in 2012.

Roland Hwang, transportation director for the Natural Resources Defense Council, warned that recovering costs from industry is easier said than done. 

“We know the negotiations to keep this group well-funded are going to be difficult over time,” he said. “What they're trying to do here is an under-the-radar way to start de-funding our air quality policeman.”

Oge said funding the operation through fees collected from industry would require negotiations with automakers, and a new agency regulation. That process could take two to three years, creating the potential for a funding gap for the department that could disrupt the ability for manufacturers to introduce their products.

Gloria Bergquist, a spokeswoman for the trade group Alliance of Automobile Manufacturers, said the prospect of higher fees assessed on its members, which include General Motors Co., Fiat Chrysler Automobiles NV and Volkswagen AG, will require a “thorough” review of the proposal. 

In addition, she noted the importance of the EPA certifications that new vehicles comply with emissions standards, saying vehicles “cannot be shipped from plants or docks” without them.

“Whatever the agency decides to do, automakers will want to avoid any delays in the certification process that could increase vehicle costs and limit vehicle availability to market,” she said.

To contact the reporter on this story: Ryan Beene in Washington at rbeene@bloomberg.net.

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net, Michael B. Marois