Navistar (NYSE:NAV)
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Truck maker Navistar International Corp. (NAV) intensified its dispute with the U.S. Environmental Protection Agency by accusing the agency of allowing an industry trade group to write the EPA's guidelines for complying with new diesel-exhaust regulations.

The EPA's certification of selective catalytic reduction, or SCR, and the rules for using the technology on commercial trucks were "substantially adopted" or lifted "verbatim" from drafts written by the Engine Manufacturers Association, Navistar said in a filing earlier this month with the U.S. Court of Appeals in Washington.

The engine association didn't return several calls for comment.

The filing is intended to bolster Navistar's lawsuit, filed in March, challenging the EPA's certification process for SCR. The company alleges the agency disregarded its own procedures and requirements to accommodate truck makers wishing to install SCR on new diesel engines. In the latest filing, Navistar accuses the EPA of fashioning a biased and incomplete record of comments and concerns about SCR, which involves filtering engine exhaust through a urea solution to reduce nitrogen oxide and other pollutants.

The EPA said Wednesday it wouldn't have an immediate response. Stricter federal standards on nitrogen oxide emissions from diesel engines commence in January 2010. Complying with the regulations is expected to add several thousand dollars to the cost of a new commercial truck.

Navistar, a member of the engine association, is the only U.S. truck maker not using SCR, which also is widely deployed in Europe. Illinois-based Navistar is relying on a treatment system that recirculates exhaust through its engines, eliminating the need for urea and other treatment components used in selective catalytic reduction. Critics have said Navistar's complaints about SCR are designed to mask the shortcomings of its emissions system.

Navistar's filing portrays the Chicago-based engine association as an influential intermediary in developing a consensus around the use of SCR. The company cited email correspondence from the association that Navistar said supports its contention that the EPA ceded control over the guidelines for SCR to the trade association.

"We have had a number of internal phone calls about the SCR guidance document and I'm pleased to report that we have convinced everybody to drink the Kool-Aid," said Jed Mandel, the engine association president, in a Jan. 22, 2009, email to Karl J. Simon, acting director of the EPA's compliance and innovative solutions division, that included a draft of the usage guidelines. "It would be in everyone's best interests to get your autograph on this as soon as possible - and have this done."

Navistar particularly objects to an EPA provision allowing commercial trucks with SCR to operate for up to 1,000 miles without a functioning system before the engine becomes inoperable. A tank with urea has to be replenished every several thousand miles to keep the system functioning properly. Navistar maintains truckers could repeatedly invoke the 1,000-mile exemption, undermining the effectiveness of the emissions regulation.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com