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Tesla and EPA Reach a Settlement After Automaker's Clean Air Act Violations

Josh Edelson | AFP | Getty Images
  • The EPA found that Tesla violated regulations known as the National Emission Standards for Hazardous Air Pollutants for Surface Coating of Automobiles from October 2016 through September 2019 in Fremont.
  • During that time, the Fremont factory had multiple fires and employees previously told CNBC that months before one fire in April 2018 filters below the paint booths and exhaust systems, meant to clean and carry air into and out of the building, were visibly coated with paint and clearcoat.
  • Tesla will pay a penalty of $275,000, which is immaterial to a business that reported $2.3 billion in net income during the fourth quarter of 2021.

Tesla has reached a settlement agreement with the U.S. Environmental Protection Agency after the regulators determined Elon Musk's electric car and solar business had violated the Clean Air Act at its vehicle assembly plant in Fremont, California.

According to an announcement from the EPA on Tuesday, Tesla will pay a penalty of $275,000, which is immaterial to a business that reported $2.3 billion in net income during the fourth quarter of 2021.

The EPA explained that Tesla violated regulations known as the National Emission Standards for Hazardous Air Pollutants for Surface Coating of Automobiles from October 2016 through September 2019 in Fremont.

A spokesperson for the EPA told CNBC in an e-mail Tuesday night: "The penalty was calculated using EPA's Clean Air Act Civil Penalty Policy and the relevant facts of the matter (number and type of violations). The size of the violator is considered under EPA's penalty policy as well."

As CNBC previously reported, the paint shop at Tesla's car plant in Fremont had multiple fires during those years. In 2018, employees told CNBC that months before one fire in April that year, filters below the paint booths and exhaust systems, meant to clean and carry air into and out of the building, were visibly coated with paint and clearcoat.

The EPA announcement on Tuesday also said Tesla failed to "develop and/or implement a work practice plan to minimize hazardous air-pollutants emissions from the storage and mixing of materials used in vehicle-coating operations."

Tesla, which bills itself as a "sustainable" company, also neglected to even measure emissions from its coating operations, and failed to collect and keep legally required records associated with its hazardous air-pollutants emission rates, according to the EPA announcement.

Asked if the EPA had other investigations into or settlement negotiations underway with Tesla regarding its coatings operations in Fremont, the agency declined to comment. The EPA said it had investigated Tesla's compliance with certain air toxics rules of the Clean Air Act and Tuesday's settlement, "addresses all concerns with respect to those rules."

Read the full settlement document here:

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