WASHINGTON - Volkswagen AG and the U.S. Justice Department are nearing an agreement to resolve the government's civil and criminal investigations that would require the German automaker to pay a penalty of more than US$3 billion, sources briefed on the talks said on Friday.

The agreement is not final and could still change or fall apart but a deal could be announced as early as next week.

Volkswagen is also expected to face oversight by an outside monitor and agree to other significant reforms in connection with its diesel cheating scandal as part of a likely deferred prosecution agreement. VW has previously agreed to pay up to US$17.5 billion to resolve claims by U.S. owners, federal and state regulators and dealers.

A VW spokesman in Germany declined to confirm the report, saying the automaker is in discussions with authorities.

Volkswagen and the Justice Department have held intensive talks this week aimed at resolving the case before President Barack Obama leaves office on Jan. 20. Sources briefed on the talks said if a deal was not reached before then it could significantly delay an agreement.

VW admitted in September 2015 to installing secret software known as "defeat devices" in 475,000 U.S. 2.0-litre diesel cars to cheat exhaust emissions tests and make them appear cleaner in testing than they really were.

In reality, the vehicles emitted up to 40 times the legally allowable pollution levels.

The company later admitted to also using "defeat devices" in 3.0-litre vehicles. The 80,000 3.0-litre U.S. vehicles had an undeclared auxiliary emissions system that allowed the vehicles to emit up to nine times allowable limits.

The scandal hurt VW's global business and reputation, and led to the ouster of longtime Chief Executive Officer Martin Winterkorn. VW has been barred from selling any new diesels in the United States since late 2015. 

Also on Friday, the U.S. Environmental Protection Agency has approved a fix for about 70,000 polluting Volkswagen diesel vehicles, it said on Friday.

The German automaker agreed to buy back up to 475,000 polluting 2009-2015 vehicles in June at a cost of as much as US$10.033 billion, or fix them if regulators approved.

The vehicles covered by the approved fix are the 2015 diesel Volkswagen Beetle, Golf, Golf SportWagen, Jetta, Passat and 2015 diesel Audi A3.

The fix involves an initial software change available now. A second phase of the fix will start about a year from now when VW will install more software updates and new hardware, including a diesel particulate filter, diesel oxidation catalyst and NOx catalyst.

In October, a federal judge approved VW's settlement with regulators and U.S. owners of 475,000 polluting diesel vehicles with smaller 2.0-litre engines, including an offer to buy back or fix all of the cars.

VW is still waiting for approval for fixes for about 400,000 remaining 2.0 litre vehicles.

"With today's approval, VW can offer vehicle owners the choice to keep and fix their car, or to have it bought back," the EPA said in a statement, adding that test data demonstrated the fix would "not affect vehicle fuel economy, reliability, or durability."