SETTLEMENT AGREEMENT

WHEREAS, on August 20, 2010, the United States Environmental

Protection Agency ("EPA" or "Agency") published the "National Emission

Standards for Hazardous Air Pollutants for Reciprocating Internal Combustion

Engines; Final Rule," 75 Fed. Reg. 51,570 (August 20, 2010) ("RICE NESHAP");

WHEREAS, the Engine Manufacturers Association (hereinafter "EMA.")

filed a petition for review of the RICE NESHAP in the United States Court of

Appeals for the District of Columbia Circuit (Case No. 10-1331) ("Petition"),

which case was consolidated with other cases, with Case No. 10-1331 designated

as the lead;

WIIEREAS, in order to avoid protracted and costly litigation, EMA and

EPA (collectively the "Parties") wish to implement this Settlement Agreement to

resolve Case No. 10-1331;

NOW, THEREFORE, the Parties, intending to be bound by this Agreement,

hereby stipulate and agree as follows:

1. Promptly after execution of this Agreement, the Parties will notify the

Court that they have reached a settlement, subject to required notice provisions

described in paragraph 6 below.

2. EPA anticipates that, by June 15, 2012, the Agency will sign a notice

of proposed rulemalcing that includes a proposal to revise the RICE NESHAP to

- 1 -
allow owners and operators of spark-ignition 4-stroke rich burn engines that meet

an emission standard requiring a 76 percent or greater reduction of the pollutant

formaldehyde, to prove compliance with the standard based on approved testing

that shows at least a thirty percent reduction in total hydrocarbons and that, by

March 14, 2013, the Administrator of EPA will sign a final action on this proposal,

which may include signature of a final rule by the Administrator.

3. If EPA promulgates in final form an amendment to the RICE

NESHAP that includes changes that are substantially the same substance as that set

forth in the description of the proposal in paragraph 2 above, then EMA shall

promptly file a stipulation of dismissal of No. 10-1331. Such stipulation of

dismissal shall be in accordance with Rule 42 of the Federal Rules of Appellate

Procedure, with each party to bear its own costs and attorneys' fees. In addition,

EMA shall not challenge the validity of the pox-tion of the final rule adopting such

amendments of substantially the same substance as that set forth in the description

of the proposal in paragraph 2 above in any court or administrative proceeding.

EMA reserves any rights it may have to challenge in any court or administrative

proceeding any portion of such final rule that is not of substantially the same

substance as in paragraph 2 above.

4. Subject to paragraph 5 below, and if and only if EPA does not sign the

proposal described in paragraph 2 above by the date set forth in paragraph 2 above,

- 2 -
or if and only if EPA does not sign a final action that amends the RICE NESHAP

that includes a change that is substantially the same substance as that set forth in

the description of the proposal in paragraph 2 above by the date set forth in

paragraph 2 above, then EMA may file a motion that requests that the Court lift the

stay of proceedings and establish a schedule for briefing to adjudicate its challenge

in petition No. 10-1331. The right to make such a request constitutes EMA's sole

remedy available under this Agreement.

5. In the event that EPA fails to take an action set out in paragraphs 2

and 4 above by the specified dates, before EMA may under paragraph 4 file a

motion that requests the Court to lift the stay and establish a briefing schedule to

adjudicate its challenge in petition No. 10-1331, EMA must first notify the

undersigned signatories 20 days prior to exercising such rights, so that the Parties

may negotiate any appropriate modification of this Agreement. If EPA completes

the relevant action within this 20-day period, or if the Parties enter a modification

of this Agreement that modifies the date for the completion of the relevant action,

then EMA shall not file a motion that requests the Court to lift the stay and to

establish a briefing schedule to adjudicate its challenge in petition No. 10-1331. If

EPA does not complete the relevant action within this 20-day period or the Parties

do not enter into a modification of this Agreement that modifies the date for the

completion of the relevant action, then EMA may under paragraph 4 file a motion

- 3 -
that requests the Court to lift the stay and to establish a briefing schedule to

adjudicate its challenge in petition No. 10-1331 in accordance with paragraph 4.

6. EPA and EMA agree and acknowledge that before this Agreement is

final, EPA must provide notice in the Federal Re i~ ster and an opportunity for

comment pursuant to Clean Air Act section 113(g), 42 U.S.C. § 7413(g). EPA

shall submit said notice of this Agreement to the Federal Rueter for publication

as expeditiously as possible. After this Agreement has undergone an opportunity

for notice and comment, the Administrator and/or the Attorney General, as

appropriate, shall promptly consider any such written comments in determining

whether to withdraw or withhold her consenfi to the Agreement, in accordance with

section 113(g) of the Clean Air Act. This Agreement shall become final on the

date that EPA provides written notice of such finality to Petitioners.

7. Nothing in the terms of this Agreement shall be construed to limit or

modify the discretion accorded EPA by the Clean Air Act or by general principles

of administrative law. Nothing in the terms of this Agreement shall be construed

to limit EPA's authority to alter, amend, or revise any final rule EPA may issue or

to promulgate superseding regulations.

8. Any obligations of EPA to obligate or expend funds under this

Agreement are subject to the availability of appropriations in accordance with the

Anti-Deficiency Act, 31 U.S.C. § 1341. This Settlement Agreement shall not be

- 4 -
construed to require the United States to obligate or pay funds in contravention of

said Anti-Deficiency Act, 31 U.S.C. § 1341.

9. Except as provided in this Settlement E~greement, none of the parties

hereto waives or relinquishes any legal rights, claims or defenses it may have.

1.0. The undersigned representatives of each party certify that they are

fully authorized by the party that they represent to bind that respective party to the

terms of this Agreement.

IGNACIA S. MORENO

Assistant Attorney General

on

U.S. Department of Justice

Environmental Defense Section

PO Box 23986

Washington D.C. 20026-3986

(202) 514-0997

Counsel for United States

Environmental Protection Agency

Dated: `~ 6 ~ ~ ! ~ t(

T A. -~

C O LAW PARTNERS, LLC

333 Wacker Drive

Suite 810

Chicago, Ill. 60b06

(312) 929-1954

Counsel for Engine Manufacturers

Association

Dated: ~ p -fit.{ - ~

- 5 -