Power Engineering - AEP settles NSR case

9 October 2007 -- American Electric Power said it reached a settlement agreement with the U.S. Environmental Protection Agency, eight states and 14 environmental organizations, ending almost eight years of litigation regarding alleged violations of the New Source Review provisions of the Clean Air Act.

AEP admitted no violations of law, and all claims against AEP were released. However, under terms of the settlement agreement filed in the U.S. District Court for the Southern District of Ohio, AEP agreed to annual sulfur dioxide (SO₂) and nitrogen oxides (NO_X) emissions limits for its fleet of 16 coal- fueled power plants in Indiana, Kentucky, Ohio, Virginia and West Virginia. The company also agreed to install additional emissions control equipment on two plants.

AEP also will provide $36 million for environmental projects coordinated with the federal government and $24 million to the states that were parties to the agreement for environmental mitigation. AEP will pay a civil penalty of $15 million.

The NSR provisions require new major sources of emissions or existing sources that undergo major modifications to install additional environmental controls. The complaint alleged that AEP made major modifications at some of its coal-fueled generating units without obtaining the necessary permits and without installing controls required by the Clean Air Act to reduce SO₂, NO_X and particulate matter emissions.

"Since November 1999, when the initial complaint was filed by the government, we have remained firm in our belief that we operated our plants in compliance with the New Source Review provisions," said Michael G. Morris, AEP's chairman, president and chief executive officer. "That remains our position today."

The claims, initially filed on Nov. 3, 1999, by the U.S. Department of Justice on behalf of the U.S. EPA, eventually included allegations involving nine AEP plants: Amos, Cardinal, Clinch River, Conesville, Kammer, Mitchell, Muskingum River, Sporn and Tanners Creek. New York, Connecticut, New Jersey, Vermont, New Hampshire, Maryland, Rhode Island and Massachusetts intervened. Complaints were filed by Ohio Citizen Action, Citizens Action Coalition of Indiana, Hoosier Environmental Council, Valley Watch, Ohio Valley Environmental Coalition, West Virginia Environmental Council, Clean Air Council, Izaak Walton League of America, U.S. Public Interest Research Group, National Wildlife Federation, Indiana Wildlife Federation, League of Ohio Sportsmen, Sierra Club and Natural Resources Defense Council.

A trial on liability was held in July 2005 in U.S. District Court for the Southern District of Ohio, but the company said no decision has been rendered.

In the settlement, AEP agreed to install selective catalytic reduction and flue gas desulfurization emissions control equipment on both generating units at its Rockport Plant in Rockport, Ind. Unit 1 at Rockport will be retrofitted with an SCR system to reduce NO_X and a scrubber to reduce SO₂ by the end of 2017. Unit 2 at Rockport will receive the same equipment by the end of 2019.

As part of its NO_X reductions, AEP committed to operate its SCRs year- round on generating units at Amos, Mountaineer and Muskingum River Plants in 2008. SCR equipment is currently operated to reduce NO_X emissions only during the May to September ozone season. AEP also agreed to install selective non- catalytic reduction at its Clinch River Plant in Cleveland, Va., by the end of 2009.

To reduce SO₂ emissions, AEP committed to complete previously announced scrubbers for its Big Sandy and Muskingum River plants by Dec. 31, 2015. AEP also agreed to plant-specific SO₂ emission limits for its Clinch River Plant, and its Kammer Plant near Moundsville, W.Va.

AEP said that since 2004 it has spent nearly $2.6 billion on installation of emissions control equipment on its coal-fueled plants in Kentucky, Ohio, Virginia and West Virginia as part of a larger plan to invest more than $5.1 billion by 2010 to reduce the emissions of its generating fleet. The cost of the additional environmental controls for Rockport and Clinch River agreed to in the settlement will be approximately $1.6 billion (net present value).

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