The Tennessee Valley Authority—the largest public utility in the U.S.—is reportedly considering shuttering two of its oldest coal-fired power plants. At the same time, it is moving forward with plans to end wet storage of ash and gypsum at fossil fuel plants, with a goal of modernizing its facilities and impoundments.

The utility is studying whether it should shut down its John Sevier Fossil Plant near Rogersville, Tenn., and the six oldest units at its Widows Creek Fossil Plant in Alabama, the Chattanooga Times Free Press reported on Monday.

The newspaper suggested that the closures would be in response to a Fourth Circuit Court of Appeals ruling in January this year. A federal judge had then ordered the utility to upgrade or install scrubbers to reduce sulfur dioxide and selective catalytic reduction systems to reduce nitrogen oxide  at its Bull Run, Kingston, and John Sevier plants—all three in Eastern Tennessee—and at Widows Creek in Northern Alabama. The pollution controls would cost—at a minimum—about $1 billion, the court estimated.

The TVA has appealed the landmark ruling, which declared emissions from the public company’s coal plants in Tennessee and Alabama a public nuisance in North Carolina. That case is developing into a “legal thriller,” according to some legal groups, because it could pave the way for public nuisance suits to regain prominence in climate change–related litigation.

In a latest development, Alabama’s Attorney General Troy King intervened in North Carolina Attorney General Roy Cooper’s suit. Kings attorneys called the court’s decision “extraordinary,” reported Legal Newsline last week.

“Pursuant to a North Carolina statute expressly directing him to do so, North Carolina’s attorney general convinced the district court to enter a sweeping, detailed and demanding injunction that purports to micromanage the operation of a power plant located in Alabama,” they wrote. “"The details of that injunction come straight out of North Carolina’s Clean Smokestacks Act, and thus place the burden of North Carolinians’ policy choices squarely on the shoulders of Alabamians."

TVA President Kilgore told the Chattanooga Free Press that the decision to shutter the two plants has not yet been made, though he did confirm that the utility plans to build an $820 million combined cycle gas plant to replace the 52-year-old John Sevier plant.

The newspaper reports that TVA’s coal-fired fleet on average are 47.1 years—the oldest of any other Southern utility. It also alleged that the “TVA … invested only 40 percent as much in maintaining its fossil units last year as did its biggest neighbors — Southern Co., Progress Energy and American Electric Power.”

Last week, the utility’s board was briefed on a plan that proposes to convert all TVA wet ash and gypsum storage to dry storage for the explicit purpose of eliminating the classification of any TVA impoundments as high-hazard for risk to people and property if the impoundment were to fail. The TVA developed the remediation plan at the Board’s direction, following the ash spill at Kingston Fossil Plant in East Tennessee in December 2008.

The projected cost of the program over eight to 10 years is $1.5 billion to $2 billion. Of that total, $181 million is budgeted for fiscal year 2010, with $625 million projected to be invested by the end of 2012.

Under the program, all six of TVA’s 11 coal-burning plants that use wet fly-ash handling systems would be converted to dry. The plants are Allen, Gallatin, Johnsonville, and Kingston in Tennessee; Widows Creek in Alabama; and Paradise in Kentucky. All 11 TVA coal-burning plants now use wet bottom-ash systems, and these would also be converted to dry systems.

The proposed program would also build four gypsum dewatering facilities and close 18 existing ash and gypsum ponds. The plans are subject to completion of required environmental reviews and will require regulatory approval.

Sources: TVA, Chatanooga Free Press, Legal Newsline