A settlement to resolve alleged violations of the New Source Review (NSR) provisions of the Clean Air Act reached between the Dairyland Power Cooperative (DPC), federal entities, and the Sierra Club will force the Wisconsin utility to invest about $150 million in pollution control technology, retire three coal units at its 210-MW Alma Station, and pay a civil penalty of $950,000.

The settlement is the 22nd judicial settlement secured by the Environmental Protection Agency (EPA) and the Department of Justice, and the 23rd settlement overall, as part of a national enforcement initiative to control emissions from power plants under NSR requirements.

It would “improve air quality in Wisconsin and downwind areas by significantly reducing releases of sulfur dioxide, nitrogen oxide and other harmful pollutants,” said Ignacia S. Moreno, assistant attorney general for the Environment and Natural Resources Division of the Department of Justice on Friday. Moreno added that the agreement also demonstrated the Justice Department’s “commitment to enforcing the New Source Review provisions of the Clean Air Act.”

In a statement on Friday, DPC stressed that the settlement did not mean DPC admitted violations of law. The settlement had avoided a “long, drawn out legal battle would not be in the best financial interest of Dairyland’s members and, since we had already begun adding hundreds of millions of dollars of air emission controls at our power plants, we agreed to work toward a settlement to reduce the risk of uncertain outcomes and the accompanying additional rate pressure for our cooperative consumers,” said DPC President and CEO Bill Berg.

Berg added that the consent decree recognized DPC’s “major investments” in air emission controls at its plants and formalized a commitment for additional air emission controls.

Under the agreement, which covers all seven coal-fired boilers at DPC’s three power plants in Wisconsin, DPC must control technology for sulfur dioxide, nitrogen oxides, and particulate matter emissions on its three largest units in Genoa and Alma, Wis. It will also be required to continuously operate the new and existing pollution controls and comply with stringent emission rates and annual tonnage limitations. Along with retiring the three Alma Station units (built between 1947 and 1950), DPC agreed to spend $5 million on environmental projects and pay a $950,000 civil penalty.

Even before the Sierra Club filed a civil lawsuit for alleged violations of the Clean Air Act in 2010, DPC was in the midst of a $400 million plan to reduce air emissions at its facilities, and the three oldest Alma Station generators were already slated to close at the end of 2011, it said. “The emission limitations on Dairyland’s other coal-fired facilities are consistent with our strategic intent to reduce environmental impacts and our dependence on coal in favor of other resources to diversify and improve the balance of our energy resources portfolio,” the cooperative added.

Though the utility deemed the civil penalty “inappropriate,” it said “similar agreements have included such penalties and always involve compromise.”

“This agreement eliminates the financial risk of pursuing litigation while still achieving the environmental improvements that both we and the other parties involved deem appropriate,” Berg said.

The settlement was lodged last week in the U.S. District Court for the Western District of Wisconsin.

New Source Review was created by Congress in 1977 as part of a series of amendments to the Clean Air Act. Among other things, the NSR process requires existing emission sources to undergo pre-construction environmental review and permitting for major modifications to existing facilities that would create a “significant increase” of a NSR-regulated pollutant. Routine maintenance, repair, and replacement are exempt from the NSR process. However, the NSR program has been subject to conflicting and changing interpretations because many of its terms are not precisely defined in the Clean Air Act.

Sources: POWERnews, EPA, DOJ, DPC

—Sonal Patel, Senior Writer (@POWERmagazine)