(Adds comments from environmental group, details of decision, background)
By David Shepardson
WASHINGTON, July 20 (Reuters) - The Justice Department said on Thursday it had dropped a requirement that Harley-Davidson Inc should spend $3 million to reduce air pollution as part of a settlement that the Obama administration had announced in August.
Last year, the Milwaukee-based motorcycle maker agreed to pay a $12 million civil fine and stop selling illegal after-market devices that caused its vehicles to emit too much pollution, and spend about $3 million to retrofit or replace wood-burning appliances with cleaner stoves.
In a court filing, the Justice Department cited a new policy by U.S. Attorney General Jeff Sessions and an ongoing review of the penalty by a government auditor in dropping the $3 million penalty from the settlement.
Reuters reported that the Justice Department planned to drop the requirement on Wednesday. The revised consent decree needs approval from a federal judge in Washington.
The announcement "could herald the start of the Trump EPA’s retreat from a longstanding enforcement practice to offset illegal pollution in American communities," said John Walke, clean air director at the Natural Resources Defense Council.
"Instead of allowing this settlement to proceed, EPA is taking the irresponsible step of allowing polluted air to escape remedy," he said.
The Harley-Davidson settlement came amid greater scrutiny on emissions and "defeat devices" by U.S. regulators after Volkswagen AG admitted to using illegal software to evade U.S. emissions standards in nearly 600,000 U.S. vehicles in September 2015.
Announced in April after a lengthy government investigation, the settlement resolved allegations that Harley sold about 340,000 "super tuners" enabling motorcycles since 2008 to pollute the air at levels greater than what the company certified.
According to the government, the sale of such "defeat devices" violated the federal Clean Air Act.
Harley did not admit liability, and said previously it disagreed with the government, arguing that the tuners were designed and sold to be used in "competition only."
However, the Environmental Protection Agency said last year the vast majority of these tuners were used on public roads.
The Justice Department said Harley in February asked it to delay finalizing the agreement until after the government audit report was completed.
Harley was also accused of selling more than 12,600 motorcycles that were not covered by an EPA certification governing clean air compliance.
The settlement required Harley to stop selling the super tuners by last August, and to buy back and destroy all such tuners in stock at dealerships. (Reporting by David Shepardson; Editing by Bernadette Baum)