Kohler to pay ‘precedent-setting’ $20M over emissions violations

Manufacturing company Kohler must pay a $20 million civil penalty in a resolution reached Thursday with the Department of Justice, Environmental Protection Agency, and state of California over alleged violations of the Clean Air Act and California law.

The violations pertain to Kohler’s manufacture and sale of millions of spark ignition (small SI) engines—such as those used in lawn mowers and generators—that did not conform to the certification applications Kohler was required to submit to the EPA and the California Air Resources Board (CARB). More than 144,000 of the engines were also equipped with “defeat devices,” designed to cheat emissions testing standards, the Justice Department said.

As part of the resolution, Kohler must also retire unlawfully generated hydrocarbon and oxides of nitrogen emission credits.

In a statement, EPA Pacific Southwest Regional Administrator Mike Stoker said the “precedent-setting settlement sends an unequivocal message to all types of engine manufacturers—from manufacturers of heavy-duty highway engines to manufacturers of small nonroad engines like those at issue in this settlement—that EPA will vigorously investigate and bring companies into compliance to reduce pollution and protect public health.”

The settlement holds Kohler accountable for “flouting federal law and evens the playing field for others in the regulated community who invest in compliance programs designed to prevent illegal and harmful emissions to the air,” said Assistant Attorney General Jeffrey Bossert Clark of the Justice Department’s Environment and Natural Resources Division.

Compliance obligations

In December 2015, Kohler self-disclosed to the EPA and CARB it had been using the wrong test cycle to test many of its small SI engines. The EPA and CARB’s subsequent investigation revealed millions of additional small SI engines were noncompliant. The DOJ acknowledged Kohler’s cooperation with the government’s investigation.

Additionally, Kohler mitigated the emissions and agreed to new procedures to ensure future compliance. Specifically, it has established an independent environmental regulatory compliance team, conducts annual compliance training for engine division employees, and maintains an employee code of conduct and an ethics helpline for employees to report noncompliance.

Kohler also will convene semi-annual meetings with all engine division managers and regulatory personnel to discuss compliance with applicable regulatory requirements and the settlement. Kohler must also conduct annual audits and implement an emissions testing validation plan that includes third-party observation and emissions verification testing. Kohler estimates the compliance measures will cost approximately $3.7 million.

In a separate settlement agreement resolving California-only claims, Kohler will pay an additional $200,000 civil penalty. “In addition, Kohler will be funding an innovative program to supply free, ultra-clean solar-powered generators to low-income Californians who live in areas that are subject to more frequent utility power outages,” said CARB Executive Officer Richard Corey.

”It is important to note that Kohler settled this case without an admission of liability,” the company said in a statement. ”It was always the company’s intent to comply with relevant regulations, and we took steps to swiftly correct the issues. Since voluntarily self-disclosing four years ago, we have been fully transparent and cooperative with the agencies to resolve these complex issues, and the agreement allows us to put this matter behind us and move forward.”