Duke Energy Gallagher Plant Clean Air Act Settlement

WASHINGTON - Duke Energy, one of the largest electric power companies in the nation, will spend approximately $85 million to significantly reduce harmful air pollution at an Indiana power plant and pay a $1.75 million civil penalty, under a settlement to resolve violations of federal clean air laws, the Justice Department and the U.S. Environmental Protection Agency (EPA) announced today. The settlement also requires Duke to spend $6.25 million on environmental mitigation projects.

On this page:

• Overview of Company and Facility Location
• Violations
• Injunctive Relief
• Pollutant Reductions
• Health and Environmental Effects
• Environmental Mitigation Projects
• Civil Penalty
• State and Citizen Partners
• Comment Period
• The Power Plants Enforcement Effort

Overview of Company and Facility Location

Duke Energy (Duke), based in Charlotte, N.C. is one of the largest electric power companies in the nation. Duke supplies and delivers energy to approximately 4 million customers in the Midwest and the Carolinas. Duke's Gallagher Generating Station (Gallagher Plant), the subject of this settlement, is located in New Albany, Ind., which is directly across the Ohio River from Louisville, Ky. The Gallagher Plant has four 140 megawatt (MW) coal-fired electric generating units.

The settlement does not resolve EPA's other pending litigation against Duke for violations of the Clean Air Act, including an appeal to the United States Court of Appeals for the Seventh Circuit involving the Wabash River Plant located in West Terre Haute, Ind., and an enforcement action pending in the United States District Court for the Middle District of North Carolina involving the company's coal-fired power plants located in North and South Carolina.

Violations

In May 2009, a federal jury sitting in Indianapolis, Ind., found that Duke made illegal modifications to Gallagher Units 1 and 3 that caused significant increases in sulfur dioxide (SO₂). The company made these modifications without first complying with pre-construction obligations, including obtaining pre-construction permits and installing and operating state-of-the-art pollution control technology, in violation of:

• The Clean Air Act (CAA) Nonattainment New Source Review and Prevention of Significant Deterioration provisions, 42 U.S.C. §§ 7470-7492, 7501-7515
• The Indiana State Implementation Plan (Indiana SIP)

Injunctive Relief

The consent decree secures injunctive relief at all four units at the Gallagher Plant even though only Units 1 and 3 were found to be in violation of the Act. The settlement is anticipated to reduce sulfur dioxide (SO₂) emissions at the Gallagher Plant by about 35,000 tons per year, an 86 percent reduction in emissions when compared to 2008 emissions. Duke could spend approximately $85 million between 2010 through 2012 to implement the injunctive relief portion of the settlement aimed at reducing emissions at the Gallagher Plant.

Units 1 and 3

• Duke will elect to either permanently shutdown or repower the units to burn natural gas instead of coal.
• Duke will make this election by January 1, 2012.
• If Duke elects to repower the units, it will complete the necessary work by December 31, 2012.
• If Duke elects to shutdown Units 1 and 3, both units must be permanently retired from operation by February 1, 2012.

Either of these activities will essentially eliminate SO₂ emissions from Gallagher Units 1 and 3, resulting in a combined reduction of over 18,700 tons per year as compared to 2008 emissions. The natural gas repowering will also reduce other air pollutants, including carbon dioxide, particulate matter, nitrogen oxides, and mercury.

Units 2 and 4

• Duke will install and operate dry sorbent injection (DSI), a pollution control technology that injects a reagent into the flue gas in order to reduce SO₂ emissions.
• The operation of DSI at the specified emission rates will result in a reduction of over 16,000 tons per year as compared to 2008 emissions.

Pollutant Reductions

• SO₂ is expected to be reduced by about 35,000 tons per year (as compared to 2008 emissions) upon full implementation of the settlement.
• Nitrogen oxide emissions from Units 1 and 3 are expected to be reduced by about 2,198 tons per year as compared to 2008 emissions from repowering to natural gas.
• Once repowered to natural gas, Units 1 and 3 will not emit any particulate matter or mercury.
• The switch from coal to natural gas will also decrease carbon dioxide emissions by roughly half per unit of electricity generated.

Health and Environmental Effects

The pollutants reduced under this settlement are known to have numerous adverse, significant environmental and health effects. Sulfur dioxides and nitrogen oxides can be converted to fine particulate matter once in the air. Fine particulates can be breathed in and lodged deep in the lungs, causing a variety of health impacts, including premature death. Other health and environmental impacts from the pollutants addressed in this settlement include the following:

• Sulfur Dioxide - High concentrations of SO₂ affect breathing and may aggravate existing respiratory and cardiovascular disease. Sensitive populations include asthmatics, individuals with bronchitis or emphysema, children and the elderly. Sulfur dioxide is also a primary contributor to acid deposition, or acid rain.

• Particulate Matter - Short term exposure to particulate matter can aggravate lung disease, cause asthma attacks and acute bronchitis, may increase susceptibility to respiratory infections and has been linked to heart attacks and premature mortality.

• Nitrogen Oxides - Nitrogen oxides can cause ground-level ozone, acid rain, particulate matter, global warming, water quality deterioration, and visual impairment. Nitrogen oxides play a major role, with volatile organic chemicals, in the atmospheric reactions that produce ozone. Children, people with lung diseases such as asthma, and people who work or exercise outside are susceptible to adverse effects such as damage to lung tissue and reduction in lung function.

• Mercury - Mercury, when breathed as a vapor, can be absorbed through the lungs. Symptoms of mercury exposure include tremors, emotional changes (e.g., mood swings, irritability, nervousness, excessive shyness), neuromuscular changes (such as weakness, muscle atrophy, twitching), and adverse cognitive function, among other impacts. At higher exposures there may be kidney effects, respiratory failure and death.

• Carbon dioxide - Carbon dioxide is one of six greenhouse gases subject to an April 17, 2009 proposed endangerment finding.

Environmental Mitigation Projects

This settlement also requires Duke to spend $6.25 million on environmental mitigation projects to address the impacts of past emissions. The $6.25 million is apportioned as follows:

• $250,000 to the United States Forest Service
• $5 million for one or more of the projects specified in Appendix A to the Consent Decree
• $1 million for state-directed projects that are specified in the Consent Decree

Duke will direct a payment of $250,000 to the United States Forest Service to address acid rain in downwind National Forests alleged by the United States to have been injured by emissions from the Gallagher Plant, including:

• Hoosier National Forest
• Pisgah National Forest
• Nanatahala National Forest
• Cherokee National Forest
• Jefferson National Forest
• Daniel Boone National Forest

Duke will spend at least $5 million on one or more of three projects:

• Acquisition and restoration of ecologically significant areas in Indiana, Kentucky, Ohio Pennsylvania, and West Virginia. This project would focus on sensitive lands that are in need of conservation.

• Conversion of diesel engines to hybrid technology. This project would substantially reduce emissions of nitrogen oxides, particulate matter, and volatile organic compounds from Duke's fleet of motor vehicles located in Indiana, Kentucky, and Ohio.

• Turbine upgrades at Duke's Markland hydro station located along the Ohio River in Switzerland County, Ind. The Markland turbine upgrade project should enable Duke to produce additional MW generation from renewable hydropower, which could offset coal generation. By replacing coal generation with clean hydropower generation, Duke would reduce emissions of SO₂, and other air pollutants such as nitrogen oxides, carbon dioxide, mercury, and particulate matter.

Civil Penalty

Duke will pay a $1.75 million civil penalty to the United States within 30 days of entry of the settlement.

State and Citizen Partners

The states of New York, New Jersey and Connecticut joined the United States in the lawsuit and are parties to the settlement. The following two citizen groups also participated in the lawsuit and are parties to the settlement: Hoosier Environmental Council and Ohio Environmental Council.

Comment Period

The proposed settlement, lodged in the U.S. District Court for the Southern District of Indiana, is subject to a 30-day public comment period and final court approval. Information on submitting comment is available at the Department of Justice website.

The Power Plants Enforcement Effort

The United States has filed lawsuits against several other utilities for alleged violations of the CAA. This series of cases seeks to bring the power plant industry into full compliance with the New Source Review and Prevention of Significant Deterioration requirements of the Clean Air Act. This settlement with Duke for its Gallagher Plant violations represents the seventeenth judicial settlement under the power plants enforcement effort.

The United States has reached similar settlements with the following utilities:

• Kentucky Utilities Company
• Salt River Project Agricultural Improvement and Power District
• American Electric Power
• East Kentucky Power Cooperative
• Nevada Power Company
• Alabama Power
• Minnkota Power Cooperative and Square Butte Power Cooperative
• First Energy (Ohio Edison Company, W.H. Sammis Power Station)
• Illinois Power Company and Dynegy Midwest Generation
• Southern Carolina Public Service Authority (Santee Cooper)
• Southern Indiana Gas and Electric Company Culley Station
• Wisconsin Electric Power Company
• Virginia Electric Power Company
• Alcoa, Inc. (Rockdale, TX facility)
• PSEG Fossil, and Tampa Electric Company

The total combined sulfur dioxide and nitrogen oxides emission reductions secured from these settlements will be about 2 million tons each year once all the required pollution controls have been installed and implemented. More information about these settlements is available at the Coal-Fired Power Plant Enforcement Initiative website.

For additional information, contact:

Ilana Saltzbart
U.S. Environmental Protection Agency (2242A)
1200 Pennsylvania Ave., N.W.
Washington, DC 20460-0001
(202) 564-9935
saltzbart.ilana@epa.gov