Volkswagen’s current diesel disaster is not the first time the Environmental Protection Agency has discovered that a vehicle manufacturer had been cheating on their diesel emissions tests. Here’s how the U.S. government won $1 billion from diesel cheaters nearly two decades ago.

That VW’s small diesel passenger car engines were spewing out significantly more toxic NOx than law allowed is, quite surprisingly, not extremely remarkable in the world of governing the auto industry. In the past nine years alone, Europe has gone through not one but two major scandals with diesel engines producing way too much NOx.

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These issues were called “cycle beating,” where an automaker builds a car that passes emissions tests only during the test itself and never anytime else. They surfaced both in 2006 (read the full report right here) and in 2014 (read the full report on this in German here). Both may yet weigh on VW’s case here in 2015.

But there was another case that precedes VW’s current issues right here in America, again with diesels, again even with defeat devices. And there’s bad news for VW: the EPA won.

The drama unfolded in 1998 when the Justice Department on behalf of the EPA straight up sued every major diesel engine manufacturer in the United States. The suit alleged these companies’ heavy trucks were “equipped with devices that defeat the engines’ emissions control system, resulting in the emission of illegal amounts of oxides of nitrogen.”

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The engines met the requirements when run on the EPA’s 20-minute test procedure, but had three times the legal NOx emissions in highway driving.

Sound familiar?

As the EPA recounts, the suit named Caterpillar, Inc., Cummins Engine Company, Detroit Diesel Corporation, Mack Trucks, Inc., Navistar International Transportation Corporation, Renault Vehicules Industriels, s.a., and the Volvo Truck Corporation.

A critical story in the libertarian-minded policy journal The Independent Review detailed the case just as it had been settled, elaborating the ‘absurdity’ of the EPA suing engine producers for making engines that technically passed all of their tests.

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In other words, one man’s cheat was another man’s way of just passing a test.

In a good example of the regulatory doublespeak common at the EPA, the engine controllers were said to have “defeated” the emissions standards by ensuring that the engines met precisely the EPA standards using EPA’s tests.

Because the EPA’s engine test focused only on simulating urban driving conditions, however, meeting the test standard allowed the engine controllers to focus on mileage rather than on emissions under highway driving conditions. In effect, the EPA sued the engine manufacturers because the engine makers had not designed their engines to meet a test procedure EPA had not created.

Despite the legal absurdity of the EPA’s position, in 1998 the firms and the EPA signed a $1 billion settlement that tightens the previous regulatory standards and specifies how the industry will regulate emissions of nitrogen oxides (NOx).

The companies were forced to spend a collective one billion dollars in total, including an $83.4 million civil penalty, at the time the largest ever for violation of environmental law.

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(I sincerely hope somebody at the EPA held a pinkie up to their mouth Dr. Evil style when they made the announcement. Indeed, Austin Powers came out in 1997, so it would still be fresh in their minds. You do feel old reading that.)

Now, as The Independent Review pointed out, it does seem strange that the EPA was punishing companies for passing the EPA’s own tests. The engine makers made this exact point when they argued against their regulators, as the New York Times reported. You might think the onus would be on the EPA at that point for making a bad test, but the EPA was having none of that.

Then again, if the tests are designed to simulate real-world conditions and how the trucks perform in regular driving, and the goal of the regulation is to make sure we have clean air, you can see the issue.

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“These defeat devices are really deceit devices,” EPA administrator Carol Browner said at the time. “They defeat important public health protections and deceive the American people.”

If you go and look up the full text of the Clean Air Act and search for ‘defeat,’ you will come up with this very clear explanation explicitly states under the ‘Prohibited Acts’ section, that is it prohibited “for any person to manufacture or sell, or offer to sell, or install, any part or component intended for use with, or as part of, any motor vehicle or motor vehicle engine, where a principal effect of the part or component is to bypass, defeat, or render inoperative any device or element of design installed on or in a motor vehicle or motor vehicle engine in compliance with regulations under this subchapter, and where the person knows or should know that such part or component is being offered for sale or installed for such use or put to such use.”

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This note on defeat devices is exactly what left diesel engine manufacturers at a loss. If you’re wondering why they all settled, this section of the Clean Air Act looks like the key reasoning. The EPA has said as much themselves to VW.

This 1998 case is startling because it almost exactly mirrors the drama that VW is going through at the moment. Yes, VW’s diesels passed all of the EPA’s tests while the EPA was testing them.

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But this case from 1998 (along with the wording of the Clean Air Act it affirms) set the precedent that if you use a defeat device to do exactly as the EPA tells you, don’t expect to pay less than nine figures.

Photo Credit: Getty Images (Diesel trucks are pictured here marching on Washington, if you can call it that, protesting high diesel prices. The photo was taken in the year 2000.)


Contact the author at raphael@jalopnik.com.