Maryland's $33.5 million settlement with Volkswagen in emission scandal could boost port of Baltimore

The state of Maryland’s $33.5 million deal with Volkswagen to settle claims that the German automaker polluted the air by bypassing emissions controls in its diesel cars also could bring its vehicles back to the port of Baltimore.

Under the settlement announced Wednesday, Volkswagen must pay a $29 million civil penalty and enter into a five-year contract with a public or private auto terminal in the state to handle Volkswagens or pay an additional $4.5 million. The settlement was filed as a consent decree by Attorney General Brian E. Frosh in the Circuit Court of Baltimore Wednesday.

The agreement, the largest civil penalty for a polluter in Maryland, is the last of several between the carmaker and the state stemming from the massive emissions scandal that has cost Volkswagen at least $20 billion.

Maryland filed its pollution suit against Volkswagen in 2016 as the extent of the emissions cheating scandal became apparent. Other states that follow California’s tougher-than-the-nation auto emission standards also sued but settled last year for far less per car, some for half what Maryland secured, Frosh said.

There were at least 13,000 Volkswagen-made diesels on Maryland roads at the time the cheating came to light in 2015.

“I think people understand that when you’ve been cheated, the people need to be made whole and the cheater needs to be punished,” said Frosh. “I believe that cheaters should be held accountable.”

Volkswagen previously agreed to pay $15 million to settle claims that it violated Maryland’s consumer protection laws, which included $5,100 for each consumer who owned one of the diesel-powered cars, and $73 million for environmental remediation programs.

As part of the new settlement, Volkswagen also must increase the availability of zero-emission vehicles in the state.

The state is essentially offering Volkswagen a discount on the penalty as an incentive to encourage it to choose the port of Baltimore for vehicle imports. The automaker began soliciting information in 2016 from East Coast ports closer to its key markets.

The port of Baltimore, already the nation’s leading automotive port, would benefit from any new import deal with Volkswagen. Frosh said a deal would generate spinoff economic activity and potentially lead to a long-term deal.

Should Volkswagen reach a deal to bring cars through Baltimore, it would mark something of a homecoming for the automaker. Volkswagen Beetles and Microbuses were imported through Baltimore decades ago.

But the only business from Volkswagen for the maritime terminals in recent years came when the automaker used lots at the port to store returned diesel vehicles.

Currently, Volkswagen, whose U.S. headquarters is in Herndon, Va., uses ports in Davisville, R.I.; Jacksonville, Fla.; Houston; Benicia, Calif.; and San Diego to import vehicles.

Baltimore serves a number of automakers, including BMW, Chrysler, Fiat, Ford, Jaguar, Jeep, Mercedes-Benz, Mini, Mitsubishi, Nissan, Subaru and Toyota. Port terminals handled more than 800,000 automobiles in 2017, supporting about 1,300 direct jobs from the longshoremen who drive the cars on and off ships to vehicle-processing facilities. About 65 percent of autos are imported and 35 percent exported.

Mike Miller, the port’s director of maritime commercial management, said private terminals and processors have the land, workers and capacity to handle new business from Volkswagen.

If Volkswagen chooses Baltimore as a port, Miller said, he expects it would spend more than $4.5 million. It would need to build a processing center to get the vehicles prepped for distribution via trains and trucks to auto dealers. The automaker would need to spend more on labor and operations, marking a premium for the state over the settlement, he said.

“We’re obviously always interested in autos and cargo because of the job creation,” Miller said. “I think our chances are pretty good. We’re cautiously optimistic.”

There is nothing in the consent decree requiring the automaker to do business with the port.

Volkswagen ran afoul of environmental and other laws when it used “defeat devices” in model year 2009-2015 diesel engines that enabled vehicle emissions controls to perform properly during testing but switch off during real-world driving conditions. That resulted in nitrogen oxide emissions above legally allowable levels.

The devices were installed in more than a dozen models of Volkswagen, Audi and Porsche vehicles.

Maryland Environment Secretary Ben Grumbles said that if the settlement is approved in court, an undetermined portion of the fine would go toward air pollution monitoring, inspection and enforcement. The rest would go into the state’s general tax revenue fund.

“This settlement will be put to good use for the state and for the environment department to continue the push for clean cars and healthy waters,” Grumbles said. “We’re sending a very strong signal to the public that polluters have a stiff price to pay when they violate our stringent environmental laws.”

In a statement, a Volkswagen spokeswoman called the settlement with Maryland “an important step forward for Volkswagen in resolving legacy exposure to state and local environmental claims related to the diesel matter in the United States.

“Following a recent federal court ruling, we consider the few remaining environmental claims pending in state courts to be preempted by federal law,” said Jeannine Ginivan, the automaker’s spokeswoman.

Volkswagen has recently replaced its leadership and management structure and said it would work to introduce many more types of electric vehicles. The automaker already offers an electric version of its popular Golf compact car and has a lineup of electric concepts, including a sedan, a crossover and a new Microbus it’s aiming to bring to market by 2022.

The push for more battery-powered, low- and no-emissions cars comes as the Environmental Protection Agency proposes to roll back Obama-era emissions standards for new cars and light trucks and limit California’s ability to set its own levels. Maryland and about a dozen other states follow the stricter standards.

Republican Gov. Larry Hogan’s administration has urged the federal government not to weaken emissions standards. Last year, Frosh and the attorneys general of a dozen other states warned EPA they would sue if the agency changed those vehicle emissions rules.

“This is part of a broad and holistic strategy to enhance clean cars and clean air regulation,” Grumbles said.

Baltimore Sun reporter Scott Dance contributed to this article.

meredith.cohn@baltsun.com

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