EPA's record settlement with utility could lead to other deals

AEP agreed Tuesday to spend $4.6 billion to install pollution controls on 16 power plants.

A utility's dramatic agreement this week to trim smokestack pollution may do more than help clear the nation's skies. It may clear the legal logjam that has kept other large utilities from cutting similar deals that could trigger reductions in harmful power-plant emissions.

By one estimate, US power plants could cut their emissions of pollutants linked to acid rain and smog by 20 percent.

The agreement, announced Tuesday by the US Environmental Protection Agency (EPA), sends a powerful, though not necessarily decisive, signal to other utilities, legal analysts say.

In settling an EPA lawsuit, the nation's largest utility, American Electric Power, agreed to spend $4.6 billion to reduce its emissions of sulfur dioxide (SO2) by 79 percent and nitrogen oxides (NOx) by 69 percent.The EPA called the settlement its largest pollution-enforcement victory ever.

The agreement could have an even larger impact if it persuades other big power companies to settle their own pending legal cases, legal analysts say.

"When you have an eye-popping settlement of this magnitude, it sends a strong message to other litigants that at least one player has decided to fold his tent and move on," says Lynn Bergeson, a founding partner of Bergeson and Campbell, a Washington, D.C., law firm specializing in air-pollution litigation. If an election year brings Democratic appointees to the EPA and the Department of Justice, "it may seem safer to some of these companies to deal now with the devil you know, rather than the one you don't," she adds.

Duke Energy and partner Cinergy, the nation's third- and fourth- largest utilities before they merged last year, are fighting EPA pollution charges similar to the ones AEP faced. Another suit against a subsidiary of Southern Company, the nation's second-largest utility, is also pending.

If those three utilities alone agreed to clean up their emissions as AEP now has, all four would eliminate more than 2 million tons of SO2 and NOx emissions a year – roughly one-fifth of the annual output of those pollutants from all US power plants, says John Walke, clean-air program director for the Natural Resources Defense Council. "We think this deal could be even more significant down the road if the other utilities go ahead and settle."

The utilities themselves say the AEP settlement will have no effect on their legal strategy.

"Basically, the AEP decision to settle has no impact on the Alabama Power case," says Mike Tyndall, a spokesman for Atlanta-based Southern Company, which owns Alabama Power. "We won the lower court decision and the government has appealed and is challenging that decision."

Indeed, the companies say they are already equipping their power plants with pollution-control equipment.

"We are already installing scrubbers on the vast majority of our units," says Tom Williams, spokesman for Duke Energy, based in Charlotte, N.C. While it's company policy not to comment on any discussions in ongoing litigation, he adds, "We still think we have a solid defense against the government claims" in the Duke Energy and Cinergy cases.

Tuesday's AEP deal stems from a 1999 lawsuit that the EPA filed against the company, based in Columbus, Ohio. It charged AEP with rebuilding coal-fired plants without installing pollution controls – a violation, they said, of a provision of the Clean Air Act known as New Source Review.

Companies had been reluctant to settle with the government because, under President Bush, the EPA in concert with the White House had signaled a preference for the industry-favored interpretation of the pollution rule, Mr. Walke says. Power companies have long claimed that the New Source Review does not require additional pollution controls after new plant equipment is installed, even if annual pollution goes up, as long as hourly pollution levels don't rise.

But in June, the US Supreme Court ruled 9 to 0 in favor of a stricter interpretation of that key provision.

In a statement, AEP officials said the company had done nothing wrong and had already spent $2.6 billion since 2004 to reduce the pollutants. But for business reasons, the officials added, it was best to get the dispute resolved.

Besides cutting SO2 and NOx emissions from 16 coal-fired plants in five states, the company also agreed to pay a $15 million civil penalty as well as $60 million to help fix environmental damage to Maryland's Chesapeake Bay and the Shenandoah National Park in Virginia.

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