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Volkswagen settlement funds for Alaska AEA to manage distribution of $8.1 million for environmental mitigation; federally recognized tribes will also receive funding Alan Bailey Petroleum News
In what appears to be an unexpected windfall, Alaska is to receive $8.1 million for environmental mitigation as part of the settlement of Clean Air Act violations by Volkswagen, after the company was caught fraudulently obscuring the level of pollutant emissions from diesel engines in its cars. The Alaska Energy Authority has been tasked as the lead agency in administering the distribution of the funds in the state, Betsy McGregor, AEA environmental manager, told an AEA board meeting on March 30. In addition, $54.5 million from the settlement is being distributed to federally recognized tribes across the United States, McGregor said. Emissions fraud In 2009 Volkswagen began installing devices in its diesel cars to mask nitrogen oxide emissions during emissions tests. After U.S. authorities discovered the fraud in 2014, the U.S. government and other parties eventually came to a settlement with the car company. The settlement involved massive payments as compensation for the wrongdoing.
Volkswagen agreed to compensate Volkswagen car owners in the United States, at a total cost of $11.2 billion. In addition, the company agreed to establish a $2 billion, 10-year investment plan for promoting zero emissions vehicle technology and infrastructure, with $800 million of that to be spent in California and the remainder to be spent elsewhere in the U.S. And the company put $2.9 billion into an environmental mitigation trust, in particular to reduce nitrogen oxide emissions into the atmosphere and hence offset emissions from the Volkswagen vehicles at fault. It is funding from the mitigation trust that will be making its way to Alaska for use in the state, McGregor explained.
The allocation of the trust funds to states is based on the number of Volkswagen vehicles in each state. However, Alaska’s fund allocation represents a minimum distribution under the terms of the trust, McGregor said.
Certification in April Court certification of the trust in Alaska is expected in April, after which AEA will develop a state plan for the use of trust funds. That plan needs to be approved by the trust, probably in the fall of this year. AEA will collaborate with the Alaska Department of Environmental Conservation in the administration of the fund, but ADEC does not have granting authority, McGregor explained.
After approval of the state’s plan, AEA will invite and select eligible projects to receive funding from the trust. The project selection process will probably start in the fourth quarter of 2017. The funding has to be allocated within 10 years, but with no more than one-third of the funds to be used in the first year and no more than two-thirds in the first two years, McGregor said. There is a reporting requirement on project progress, she said. AEA can use up to 15 percent of the funding to cover administrative costs.
The trust specifies 10 types of project that may be eligible for funding. All of the project types relate to the use of diesel engines, including the mitigation of emissions from buses, various types of vessel and certain types of truck. Part of AEA’s administrative role will involve seeking ways of using trust funds to leverage other funding sources, McGregor commented. For example, use of funding in the replacement of old, inefficient diesel engines in rural power plants appears to be a way of using the Volkswagen funds to obtain additional funding for this purpose through an Environmental Protection Agency funding program, she said.
Project funding will probably begin in the spring of 2018, McGregor said.
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