Cinergy, EPA reach agreement on clean air allegations

In the largest settlement ever under the Clean Air Act, the US Environmental Protection Agency and Cinergy Corp. have reached a $1.4 billion tentative agreement over allegations of illegal pollution from the company's coal-burning electric power plants. The settlement includes an $8.5 million fine, but most of the $1.4 billion will be spent upgrading coal plants at Cinergy's principal operating companies, the Cincinnati Gas & Electric Co. and PSI Energy Inc. The company admitted no wrongdoing.

Dec 22nd, 2000


In the largest settlement ever under the Clean Air Act, the US Environmental Protection Agency and Cinergy Corp. have reached a $1.4 billion tentative agreement over allegations of illegal pollution from the company's coal-burning electric power plants.

The settlement includes an $8.5 million fine, but most of the $1.4 billion will be spent upgrading coal plants at Cinergy's principal operating companies, the Cincinnati Gas & Electric Co. and PSI Energy Inc. The company admitted no wrongdoing.

Sulfur dioxide emissions will be reduced 400,000 tons/year and nitrogen oxide, 100,00 tons/year as a result of the agreement, EPA said. The agreement in principle will form the basis of a consent decree expected to be signed in the next 2 months, an EPA spokeswoman said.

Under the agreement, EPA and the other plaintiffs have agreed to drop all challenges of past maintenance and repair activities at Cinergy's coal-fired generation fleet, Cinergy said in a statement. In addition, Cincinnati-based Cinergy will be allowed to continue ongoing activities without subjecting the plants to new federal permitting requirements.

Cinergy said it committed to close or repower with natural gas nine small coal-fired boilers at three power plants beginning in 2004, build four additional sulfur dioxide scrubbers starting in 2008, upgrade existing pollution control systems, and phase in the operation of nitrogen oxide (NOx) reduction technology year-round starting in 2004.

The settlement is part of an investigation by the EPA involving more than a half dozen of the nation's biggest utilities. Cinergy was one of seven utilities companies, including American Electric Power Co.; FirstEnergy Corp.; Illinois Power, a unit of Dynegy Inc.; Southern Indiana Gas & Electric Co., a unit of Vectren Corp., Southern Co. and Tampa Electric, a unit of TECO Energy Inc.; sued by the US Justice Department on behalf of the EPA in November 1999 for violations of the Clean Air Act.

The EPA alleged the companies violated federal pollution laws by modifying some of their coal-burning plants without installing required pollution control equipment. Tampa Electric signed a consent decree with the EPA in February.

No earnings impact
In a statement, Cinergy Chairman James E. Rogers said the potential settlement allows the company certainty with respect to future operations and reduce emissions over a time frame "that will not compromise the reliability and affordability of electricity from our facilities."

He said the company agreed to the settlement to avoid time-consuming litigation with the government. The agreement will not affect future earnings and growth, while the capital improvements are expected to improve plant operations and maintenance, Rogers said.

William F. Tyndall, Cinergy vice-president for environmental services and federal affairs, estimated that new capital expenditures for emission control equipment required by the proposed settlement would include $580 million for the four new scrubbers and $90 million for upgrades of existing scrubbers, precipitators, and monitoring equipment.

These capital expenditures are in addition to Cinergy's previously announced commitment to install $700 million in NOx controls over the next 5 years.

Specifically, the agreement calls for the company to:

� Repower with natural gas or shut down three units totaling 150 Mw at Edwardsport Station in Edwardsport, Ind. and three boilers totaling 99 Mw at Noblesville station, Noblesville, Ind., by May 31, 2004

� Repower with natural gas or shut down three units totaling 355 Ms at Beckjord Station, New Richmond, Ohio, by Dec. 31, 2006

� Place into service new SO2scrubbers on four additional generating units between 2008 and 2013, with the first two units to be located at Gibson Station, Owensville, Ind.

� Retire 50,000 tons of SO2 allowances between 2001 and 2005 and reduce the company's SO2 cap by 35% in 2013.

� Starting in 2004, operate two selective catalytic reduction units year-round to control nitrogen oxides, and meet by 2008 a system-wide NOx year-round cap based on growth in the system and .15 lb/MMbtu of emissions.

�Upgrade existing sulfur dioxide and particulate matter control equipment.

� Invest $21.5 million in environmentally beneficial projects over the next 5 years.

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