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East Kentucky Power Cooperative Inc. Fact Sheet
East Kentucky Power Coopeative Inc. Fact Sheet (PDF) (4 pp, 73K, About PDF)
- Overview
- The Defendent
- The Acid Rain Program and Kentucky NOx Budget Trading Program
- Clean Air Act Violations
- Environmental Benefits
- Civil Penalties
On September 20, 2007, the United States Environmental Protection Agency (EPA) and the United States Department of Justice (DOJ) announced a settlement with East Kentucky Power Cooperative (EKPC) that resolves the EPA's enforcement action against EKPC for Clean Air Act (Act) violations at EKPC's Dale generating station, a coal-fired power plant, specifically, Dale Units 1 and 2. The United States alleged that EKPC violated market-based trading programs under the Clean Air Act designed to control sulfur dioxide (SO2) and nitrogen oxide (NOx) pollution.
The proposed settlement resolves these claims by requiring EKPC to participate in these market-based programs and mitigate its past excess SO2 and NOx emissions, among other requirements. In addition, EKPC will pay a fixed civil penalty of $11.4 million over a period of six years, in addition to a "contingent" civil penalty in years in which EKPC meets certain thresholds of financial performance.
EKPC is a non-profit corporation and electrical generating utility headquartered in Kentucky. EKPC operates three coal-fired power plants in Kentucky, known as the Spurlock, Dale, and Cooper plants. Spurlock Units 1 and 2, Dale Units 3 and 4, and Cooper Units 1 and 2 are the subject of this settlement. EKPC uses its power plants to generate electricity for sale to 16 electrical distribution cooperatives that, in turn, supply power to over 450,000 homes, farms, and businesses in 89 counties in Kentucky.
The Acid Rain Program and Kentucky NOx Budget Trading Program
The Clean Air Act's Acid Rain Program requires coal-fired power plants, including EKPC's Dale Plant, to participate in a market-based trading program intended to reduce sulfur dioxide (SO2) emissions, as well as comply with regulatory requirements to reduce nitrogen oxides (NOx), both primary causes of acid rain.
The Clean Air Act authorizes the Commonwealth of Kentucky and other states to implement a similar market-based trading program, known as the NOx Budget Trading Program, to control NOx emissions from coal-fired power plants during the summer months when smog-forming NOx emissions can have their greatest environmental impact. This period is known as the "ozone" season.
Specifically, each coal-fired power plant may only emit as much SO2 and NOx pollution as EPA and Kentucky, respectively, have granted the facility in "allowances," which are authorizations to emit SO2 or NOx pollution. If a coal-fired power plant's SO2 or NOx emissions are less than the allowances it has been granted by EPA or Kentucky, then it can sell the unused allowances to other utilities or bank them for use in future years. However, if a facility emitted more SO2 or NOx than the allowances it holds, then it must offset those excess emissions by purchasing allowances from other utilities and then "surrender" those allowances to EPA so that they cannot be re-sold to other utilities. In addition to the market-based trading programs, the Acid Rain Program also requires coal-fired power plants to meet an annual emission rate that substantially reduces a facility's NOx emissions.
Based in part on information supplied by EKPC, EPA alleged that EKPC had installed two 27 MW generators at Units 1 and 2 at its Dale generating station in 1998, thus bringing the units into the Acid Rain program and the NOx Budget Trading Program implemented by Kentucky through EPA oversight. EKPC operated the Dale Units 1 and 2 without informing regulators that the units had become subject to these programs. EKPC emitted SO2 for which EKPC had not been granted any allowances by EPA under the Acid Rain program, and emitted NOx in excess of the applicable emission rate under the Acid Rain program.
Additionally, EKPC emitted NOx during the 2004 and 2005 summer "ozone" seasons for which EKPC had not been granted any allowances by Kentucky under its NOx Budget Trading Program, and failed to comply with certain monitoring and recordkeeping requirements.
Finally, the complaint alleged that EKPC failed to apply for federal operating permit, known a a Title V permit, that recognized Dale Units 1 and 2 as being subject to the requirements of the Acid Rain and NOx Budget Trading programs in violation of the Title V provisions of the Act.
- Harmful Pollutants Addressed by This Settlement
- NOx : Nitrogen oxides cause a
variety of health problems and adverse environmental
impacts, such as ground-level ozone, acid rain,
particulate matter (PM), global warming, water
quality deterioration, and visual impairment. Nitrogen
oxides play a major role, along with volatile organic
chemicals, in the atmospheric reactions that produce ozone.
- SO2 : High concentrations of sulfur dioxide 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.
- NOx : Nitrogen oxides cause a
variety of health problems and adverse environmental
impacts, such as ground-level ozone, acid rain,
particulate matter (PM), global warming, water
quality deterioration, and visual impairment. Nitrogen
oxides play a major role, along with volatile organic
chemicals, in the atmospheric reactions that produce ozone.
- Purchase and Retirement of SO2 Allowances
Under Acid Rain Program.
The proposed decree requires EKPC to surrender 15,311 SO2 allowances to offset its excess SO2 emissions from Dale Units 1 and 2 for the period 2000 through 2005, the period when EKPC should have participated in the Acid Rain program.
- Installation of NOx Controls Under Acid Rain
Program.
Under the proposed settlement, EKPC will install low NOx burner technology on Dale Units 1 and 2 no later than October 31, 2007. By January 1, 2008, EKPC will be required to meet an annual average NOx limitation of 0.46 lbs/mmBTU. This will bring EKPC into compliance with the specific limit established under the Acid Rain Program. If EKPC fails to meet this limit, it will be subject to a stipulated penalty of between $10,000 and $250,000, depending on the severity of the violation.
- Purchase and Retirement of NOx Allowances as
Mitigation Under the Acid Rain Program.
The proposed decree requires EKPC to purchase and retire 1,000 NOx allowances to offset its pollution emitted from Dale Units 1 and 2 during the period that EKPC operated those units without the required NOx controls.
- Installation of Monitoring Equipment Under the
Acid Rain Program.
EKPC has already installed certified continuous emissions monitoring equipment on Dale Units 1 and 2 in anticipation of this settlement. Under the proposed decree, it would continue to operate that equipment and report data gathered with it.
- Purchase and Retirement of NOx Allowances
Under the NOx SIP Call Program.
Under the proposed settlement, EKPC will purchase and retire 3,107 NOx allowances, which represent three times its excess emissions during the summer 2004 and 2005 "ozone" seasons. Summer months are the period when smog-forming NOx pollution can have the greatest environmental impact. Therefore, the threefold surrender requirement is designed to not only mitigate excess NOx emissions, but also deter sources from avoiding their obligations under the NOx Budget Trading program.
- Application for Title V and Acid Rain Permits.
EKPC will apply for and maintain a Title V permit that recognizes Dale Units 1 and 2 as affected units under the Acid Rain Program. It has already applied for Acid Rain and NOx SIP Call permits, and has agreed to comply with those permits when they are issued.
Under the proposed settlement, EKPC would pay a fixed penalty to the United States in the amount of $1.9 million annually for six years, totaling $11.4 million ("Fixed Penalty Payment"). In addition to the Fixed Penalty Payment, commencing in 2008, EKPC would make another penalty payment each year for five years ("Contingent Penalty Payment"), if it meets certain financial thresholds identified in the settlement.